Markets Slump As Trump Recommends 50% Tariff on European Union

Forex

Economic

Summary:

U.S. President Donald Trump said on Friday that he is recommending a straight 50% tariff on goods from the European Union starting on June 1, saying the EU has been hard to deal with on trade.

Stock markets across Europe fell sharply with the STOXX 600 index last down 1.8%, U.S. stock index futures moved sharply lower while the eurotrimmed its gains.

COMMENTS:

HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG, LONDON:

"This is a major escalation of trade tensions. With Trump you never know but this would be a major escalation. The EU would have to react and it is something that would really hurt the US and European economy. But Trump is highly volatile and I would not bet on this coming through."

GERRY FOWLER, HEAD OF EUROPEAN EQUITY STRATEGY, UBS, LONDON:

"The 10% tariff that Europe is currently experiencing was always going to be a best case scenario considering that’s what the UK was able to achieve anyway. So tariffs were likely to go up, they could obviously in the worst case scenario not only be 20% but potentially higher, but also cause retaliation against some of the Mag 7.

So this is much worse but it is also a bit like the China tariffs -probably not a sustainable tariff.

"Even the fact that he’s used the phrase “I recommend” suggests this is part of the late stage negotiation tactics. But if they’re even close to being implemented, then obviously Europe’s retaliation would be very significant so quite problematic."

FIONA CINCOTTA, SENIOR MARKET ANALYST, CITY INDEX, LONDON:

"The market was in this sense of perhaps there are going to be trade deals and worst case scenario is potentially being avoided after Liberation day and then there was that pause. But this latest threat is worse than the worst case scenario."

"We're seeing a big impact in equities in Germany particularly, because they're very much an export nation to the US, which will be impacted and so those companies are going to see profits hit, they're going to see revenue and margins hit. So we're seeing the this play out much more in the equities market than others."

Source: TradingView

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Glendon

Economic

Stocks

President Donald Trump on Friday threatened to put a 25% tariff on Apple products unless iPhones are manufactured in the United States.

The threat delivered over social media could dramatically increase the price of iPhones, potentially hurting sales and the profits of one of America's leading technology companies. The company now joins Amazon, Walmart and other major companies as being in the White House's crosshairs as they try to respond to the uncertainty and inflationary pressures unleashed by the import taxes being imposed by Trump.

“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump posted on Truth Social. “If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.”

Apple, led by CEO Tim Cook, in response to Trump's tariffs on China was looking to shift iPhone manufacturing to India as it adjusts supply chains. That plan has become a festering source of frustration for the U.S. president, who also brought it up last week during his Middle East trip.

Source: Yahoo Finance

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Damon

Economic

President Donald Trump on Friday said he is "recommending a straight 50% Tariff on the European Union" after complaining that trade negotiations have stalled.

The steep new import duties would kick in in just over a week on June 1, Trump wrote on Truth Social.

The EU "has been very difficult to deal with," Trump wrote. "Our discussions with them are going nowhere!"

Source: CNBC

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Michelle

Economic

Forex

Bond

Bond investors are demanding more and more compensation to hold long-dated US debt as global markets grow anxious about the widening fiscal deficit in the world’s biggest economy.

The US 10-year term premium — or the extra return investors demand to own longer-term debt instead of a series of shorter ones — has climbed to near 1%, a level last seen in 2014. It’s a measure of how jittery investors are about plans to raise the scale of future borrowing.

The US’s funding challenges came into focus after Moody’s Ratings stripped the nation of its last top-tier credit score a week ago. That downgrade was followed by the US House of Representatives passing a multi-trillion dollar bill that extends President Donald Trump’s tax cuts, and weak demand for an auction of 20-year Treasuries.

“The danger for now is that this fiscal phenomenon feeds on itself,” said Ella Hoxha, head of fixed income at Newton Investment Management, in an interview with Bloomberg TV. “That should be somewhat of a concern, certainly for risky assets and certainly for policymakers as well, as they have to finance at much higher interest rates.”

US long-term borrowing costs surged this week, with the 30-year yield climbing to 5.15% — just shy of its highest level in nearly 20 years. The real rate for the same tenor — which is adjusted for inflation — closed at the most elevated level since 2008 on Wednesday.

The moves eased on Friday as the selloff attracted buyers, with Bank of America Corp.’s Michael Hartnett saying investors should take the opportunity to add long-dated Treasuries as the US government is likely to heed warnings from bond vigilantes to bring its debt under control. The 30-year yield traded just above 5% as of 11 a.m. in London, up for a fourth week.

Long-term bond yields have also risen elsewhere this week, with those in Japan climbing to the highest since records began in the late 1990s. Similar debt in the UK, Germany and Australia has also faced selling pressure.

Trump’s Next Hurdle: The Bond Market Hates His ‘Beautiful Bill’

It’s a reminder from markets that governments can’t keep borrowing at the pace they did when interest rates were close to zero, particularly since trade tensions and sticky inflation have diminished the probability that policymakers will dramatically ease monetary policy.

“This speaks to the ongoing degree of nervousness around the fiscal backdrop in the US, but also on a global level, where deficit concerns continue to play on the minds of market participants everywhere,” said Michael Brown, a strategist at Pepperstone. “Justifiably so, frankly, given that there seems little-to-no desire among governments to get a grip of the situation.”

Investors around the globe have been moving away from US assets since Trump unveiled high tariffs on trading partners. While some of those have since been scaled back, fund managers say there’s too much policy uncertainty.

Money managers from DoubleLine to PGIM have flagged the risk that long-term yields will keep rising, and even central banks have expressed their worries. On Friday, the governor of the Philippine central bank said the authority may consider reducing its holdings of US debt following the Moody’s downgrade.

Japanese bond markets were particularly hit by the latest selloff. That’s the result of the Bank of Japan scaling back its bond purchases as inflation accelerates, at the same time that traditional buyers like the nation’s life insurers fail to fill the gap left behind. Prime Minister Shigeru Ishiba said this week the nation’s financial conditions are worse than Greece’s.

Barclays Plc’s global chair of research Ajay Rajadhyaksha said Japan may consider asking government-owned entities to support the nation’s bond market if the selloff in longer-dated debt doesn’t abate. While this isn’t his base case and may not progress beyond an idea, in theory such a scenario could trigger sales of US Treasuries in order to pay for domestic bonds.

Strategists are widely discussing the broad implications of Japan’s bond rout for US Treasuries. Deutsche Bank AG warned the rising Japanese yields will make the notes more attractive to local buyers and so pose a threat to US debt. Albert Edwards, a global strategist at Societe Generale SA, said that while US bond and stock markets have previously benefited from money flowing from Japan, this may now be reversing.

“I would rank trying to understand and follow the surging long end of the JGB market as the No. 1 most important thing for investors at the moment,” Edwards wrote in a report to clients.

Source: Bloomberg Europe

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Glendon

Middle East Situation

The ongoing dispute over Iran’s nuclear ambitions is set to see another round of negotiations between Iranian and U.S. representatives this Friday in Rome.

This comes even as Tehran’s supreme leader cautioned that reaching a new agreement may be challenging due to conflicting demands.

The issue carries significant weight for both parties. U.S. President Donald Trump is keen on limiting Tehran’s ability to develop a nuclear weapon, a move that could potentially ignite a regional nuclear arms race.

On the other hand, the Islamic Republic is eager to lift the severe sanctions on its oil-dependent economy.

The fifth round of discussions will be held between Iranian Foreign Minister Abbas Araqchi and Trump’s Middle East envoy Steve Witkoff. These talks will be facilitated by Omani intermediaries.

Source: Investing

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Gerik

Economic

Renewing Commitments Through a Broader Economic Framework

On May 20, trade ministers from ASEAN and China officially announced the conclusion of negotiations on the upgraded China–ASEAN Free Trade Agreement (FTA), now entering its 3.0 version. This marks a milestone in the evolution of a partnership originally signed in 2004, signaling not only renewed commitments but also a reshaped vision for regional economic cooperation.

This upgraded agreement has undergone nine rounds of negotiation over two years and is currently pending member ratification, with expectations for formal signing later this year. It adds nine new chapters covering areas previously untouched by the original agreement, including digital and green economy sectors, integrated supply chain logistics, and customs procedures.

Digital, Green, and Supply Chain Integration: Strategic Domains of Expansion

According to China’s Ministry of Commerce, the latest iteration of the FTA sends a “strong message” advocating for free trade and inclusive collaboration. CCTV reported that both sides have agreed to enhance cooperation in digital infrastructure, e-payment systems, and cybersecurity, alongside developing stable and efficient regional supply chain networks.

Notably, for the first time, ASEAN and China also pledged joint efforts to formulate shared technical standards, beginning with new energy vehicles and electronics—fields pivotal for both digital transformation and environmental sustainability.

These moves reflect a growing consensus that economic resilience depends increasingly on technological alignment and supply chain diversification. Minister Wang Wentao emphasized China's readiness to work with ASEAN to secure global supply chains, promote equitable development, and uphold fairness in international commerce.

Strategic Timing in the Face of Global Trade Realignments

Analysts have drawn attention to the timing of the announcement, which closely follows new retaliatory tariff plans announced by former US President Donald Trump. With a 90-day grace period before additional duties take effect, ASEAN countries are concurrently seeking negotiations with Washington. Xu Weijun, a policy expert from South China University of Technology, noted that this urgency may have accelerated the FTA’s conclusion, positioning the deal as a stabilizing move amid intensifying trade fragmentation.

The agreement serves not only as a platform for economic expansion but also as a geopolitical signal. In an era of reconfigured alliances and trade tensions, deepening ASEAN-China trade integration may reduce the region’s vulnerability to Western protectionism and economic uncertainty.

Implications for SMEs and Regional Investment Trends

An important dimension of the upgraded FTA is its support for small and medium-sized enterprises (SMEs), which form the backbone of both ASEAN and China’s economies. Easier access to harmonized standards, improved customs facilitation, and expanded market access will likely empower SMEs to participate more actively in cross-border commerce.

Moreover, the Rhodium Group has observed that since the onset of US-China trade tensions during Trump’s first term, ASEAN has emerged as a primary destination for Chinese foreign direct investment (FDI). Over 86% of China’s FDI in ASEAN now targets high-value sectors such as automotive, ICT, renewable energy, and consumer goods manufacturing. The upgraded FTA could enhance this trend by lowering barriers and creating a more predictable business environment.

A Forward-Looking Pact for a Multipolar Trade Future

The upgraded China–ASEAN FTA is not merely an economic agreement—it represents a forward-looking regional response to global trade volatility. By expanding into digital governance, green cooperation, and technical standardization, the agreement lays the foundation for high-quality growth and regional resilience.

While its immediate impact may center on investment flows and SME engagement, the long-term significance lies in fostering a unified regional framework that can collectively adapt to global disruptions and assert greater influence in shaping future trade norms.

Source: Bastille post

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Gerik

Economic

China–U.S. Trade War

Collapse Of A Once-Thriving Trade Channel

In April, a multimillion-dollar livestock shipment from St. Louis to Hangzhou collapsed overnight. Each breeding pig, valued between $2,500 and $5,000, was intended to help China replenish its stock post-African Swine Fever. But within a week of China’s retaliatory tariffs on US goods, the $2.4 million order vanished. The pigs were later sold to slaughterhouses in Indiana for less than $200 per head.

This case epitomizes the broader collapse of the US animal genetics export industry, particularly since the onset of the US-China trade war initiated during the Trump administration. Businesses that once benefited from long-cultivated trust and growing demand are now left with canceled orders, steep financial losses, and eroding brand value.

A Niche Industry With Global Reach And Precision Requirements

Although animal breeding constitutes a niche within the $37 billion US pork industry, its role in international food security and genetic enhancement is critical. Following the African Swine Fever outbreak in 2018, China’s demand for US breeding stock surged as local producers raced to rebuild and improve swine productivity.

However, retaliatory tariffs disrupted what had become a stable and growing trade relationship. Jay Weiker, president of the National Association of Animal Breeders, noted that even frozen semen exports to China have ceased entirely—once accounting for 25% of the US total, particularly after China’s 2008 melamine milk scandal heightened its demand for genetically superior dairy cattle.

Transporting livestock genetics is not merely a matter of logistics but a high-cost, high-precision operation. Staff must accompany animals across borders, monitor temperature, hydration, and feed conditions, and sometimes sleep in temperature-controlled cargo compartments. This complexity amplifies financial risk when deals fall through.

Widespread Industry Fallout And Eroding Global Confidence

The ripple effects have extended beyond pigs and cattle. Goat and sheep breeders also report mass order cancellations, with Brittany Scott of SMART Reproduction Services citing large quantities of frozen semen now left unsold in nitrogen tanks. As these samples await buyers, producers grapple with sunk costs and wasted resources.

More critically, the damage is reputational. Tony Clayton, whose firm Clayton Agri-Marketing was once a trusted supplier in China, describes how his brand is now routinely questioned by former clients. These inquiries are not just transactional but reflect deeper uncertainty about the reliability of US supply amid political turbulence.

The hesitancy is compounded by concerns that China, seeking stability, may pivot to alternative suppliers like Denmark—especially in the premium livestock genetics segment. Despite a pause in additional tariffs, exporters remain cautious. The White House, represented by spokesperson Kush Desai, insists it is actively pursuing trade openings elsewhere, yet such promises do little to repair relationships built over years and lost in days.

A Market In Limbo Despite Diplomatic Easing

While trade negotiations show signs of resuming, producers like Mike Lemmon, the veterinarian whose order fell through, continue their work with cautious optimism. Lemmon’s personal commitment to breeding remains, but his story underscores the emotional and economic toll of geopolitical instability on small and medium-sized agricultural entrepreneurs.

The breeding industry’s dependence on long-term trust and precision makes it acutely vulnerable to abrupt policy shifts. The current disruption is not just an economic setback but a reminder of how fragile global supply chains can be when diplomacy falters.

The unraveling of livestock genetics exports highlights a deeper tension in US trade strategy—balancing geopolitical assertiveness with the operational needs of industries reliant on continuity and confidence. As China looks elsewhere and American exporters nurse their wounds, the future of this multi-billion-dollar sector hangs in the balance, shaped not by breeding science, but by diplomacy and policy consistency.