Mega Deals Resurface: Global M&A Surges in First Half Despite Trade War Headwinds

Economic

Summary:

Despite initial setbacks due to Trump's trade war and geopolitical tensions, global M&A activity surged 26% in the first half of 2025, driven by larger deals and a rebound in market confidence...

Resilient Markets and Bigger Bets Power M&A Rebound

Global mergers and acquisitions (M&A) in the first half of 2025 have outperformed cautious expectations, with total deal value reaching $2.14 trillion—up 26% year-over-year—despite market turbulence sparked by U.S. President Donald Trump’s tariff war and elevated interest rates. While the total number of deals dropped, the average deal size grew significantly, with a notable 62% rise in $10 billion-plus transactions compared to the same period in 2024.

The unexpected strength in M&A stems largely from a late-quarter resurgence in U.S. equity markets and renewed optimism among institutional investors. According to Dealogic, North American deal volume hit $1.04 trillion by June 27, while Asia accounted for $583.9 billion—more than doubling its contribution from a year earlier. Japan and China led the charge, with regional giants like Toyota and ADNOC initiating multibillion-dollar transactions that kept capital circulating within Asia-Pacific.

Trump’s Tariff Policy Initially Disrupts, Then Clears Path

The launch of President Trump’s aggressive tariff campaign—branded “Liberation Day” on April 2—initially suppressed deal activity by creating uncertainty. Many IPOs and cross-border transactions were delayed or shelved. However, the unexpected upside emerged as Trump’s administration took a more lenient stance on antitrust reviews, which investment bankers suggest may facilitate future megadeals exceeding $50 billion in size.

Market sentiment further improved as the S&P 500 and Nasdaq reached record highs, pushing down volatility. The VIX index’s decline signaled growing investor confidence. This stabilization enabled dealmakers to restart negotiations and revisit postponed IPO plans.

U.S. and Asia Anchor Activity as Europe Lags

While North America remains the largest M&A market, Asia gained over 11 percentage points in global deal share from 2024, now accounting for 27.3% of total volume. Noteworthy transactions include Toyota’s $33 billion supplier buyout and ADNOC’s $18.7 billion acquisition of Santos in Australia.

In contrast, Europe’s M&A momentum remained relatively sluggish, hampered by persistent inflation and weaker capital market performance. However, bankers expect the global upswing to eventually lift deal activity in the region, especially in sectors benefiting from clean energy subsidies and industrial digitization.

Bankers Signal Stronger H2: IPOs Return, Investors Reengage

Interviews with senior bankers from UBS, Goldman Sachs, Bank of America, and Deutsche Bank highlight growing optimism for the second half of 2025. With monetary policy expectations stabilizing and institutional investors returning to equities, a window of opportunity for IPOs and leveraged buyouts is reopening.

“We’re seeing momentum rebuild,” said Jefferies vice chairman Philip Ross. “The number of new issuances and client mandates over the past three weeks is unlike anything we’ve seen since early 2022.”

Goldman Sachs noted that Asia-to-Asia deals are accelerating, while Deutsche Bank emphasized the resilience of European equities amid geopolitical shocks. In short, there is growing consensus that dealmaking could surpass pre-pandemic levels if macro risks remain contained.

Though the number of deals signed in H1 2025 (17,528) fell short of the 20,583 deals from the same period last year, the shift toward higher-value transactions signals a new phase in global dealmaking. With regulatory barriers easing in the U.S., confidence returning to Asian markets, and risk appetite rebounding among major institutional investors, the stage is set for a blockbuster second half of 2025—one potentially marked by megadeals that redefine global capital flows.

Source: Reuters

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Economic

Senate Republicans Face Clock and Conflict Over Trump Tax Bill

Senate Majority Leader John Thune is racing against time and party discord to secure enough votes for President Donald Trump’s massive tax and spending package before the self-imposed July 4 deadline. The bill, which includes $4.5 trillion in tax cuts and $1.2 trillion in spending cuts, has triggered a showdown between moderate and hardline Republicans.

At least eight GOP senators have raised serious concerns. Thune can afford to lose only three GOP votes in the 100-seat chamber, with Vice President JD Vance available to break a tie. With Senators Rand Paul and Thom Tillis likely voting “no,” the margin for negotiation is razor-thin. Tillis, facing backlash from Trump and announcing he won’t seek reelection, has become increasingly vocal in his opposition.

Competing Demands: Medicaid Cuts vs. Energy Incentives

The divide within the GOP centers on key ideological differences. Fiscal conservatives like Ron Johnson, Rick Scott, Mike Lee, and Cynthia Lummis are pressing for deeper Medicaid cuts and more aggressive deficit reduction. In contrast, moderates such as Susan Collins, Lisa Murkowski, and Tillis are defending Medicaid and renewable energy incentives that are vital to their home states.

According to a Congressional Budget Office estimate, the proposed Medicaid reductions could cause 11.8 million Americans to lose health coverage over the next decade. Murkowski and Tillis have also pushed to preserve solar and wind tax credits that drive local job growth, further complicating consensus.

Trump’s Political Pressure and Legislative Gamble

President Trump remains focused on swift passage, largely ignoring policy disputes in favor of demanding speed. He has taken to social media to attack dissenters, labeling Tillis a “talker and complainer” and hinting at primary challenges for those who resist his agenda. Trump’s insistence on action before Independence Day has set off a grueling amendment voting process beginning Monday morning that could last over 12 hours.

Despite not engaging deeply with the bill’s specifics, Trump’s public pressure has heightened the stakes for GOP lawmakers already juggling political survival, policy concerns, and party unity.

Public Skepticism and House Hurdles Ahead

Polls indicate Americans remain wary of the legislation. A Pew Research poll shows 49% oppose the bill, while only 29% support it, with 21% undecided—reflecting widespread unease about its impact on healthcare and the national debt, especially with the inclusion of a $5 trillion debt ceiling increase.

Even if Thune can broker a fragile Senate compromise, the bill’s future in the House remains uncertain. Speaker Mike Johnson must unify his caucus behind the Senate-passed version to avoid renegotiations that could derail the July 4 timeline and provoke Trump’s ire.

The Trump tax-and-spending bill represents not only a fiscal pivot but also a test of Republican cohesion under intense political and ideological pressure. As Thune attempts to steer the legislation through a minefield of competing demands, the GOP must reconcile its internal contradictions—or risk missing the deadline and weakening Trump’s economic agenda in a critical election year.

Source: Bloomberg

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Forex

Dollar Struggles Amid Fed Speculation and Trade Shifts

The greenback slipped to its lowest levels in nearly four years against the euro and sterling, and hit a more-than-decade low against the Swiss franc, driven by renewed optimism over U.S. trade progress and growing belief that the Federal Reserve will begin easing monetary policy sooner than previously thought.

This weakness follows dovish comments from Fed Chair Jerome Powell last week, who signaled that rate cuts were likely if inflation stays in check despite tariff-related risks. The CME FedWatch Tool now shows a 92.4% probability of a rate cut by September, a significant rise from just 70% the previous week.

Geopolitical and Political Pressure on the Dollar

Additional downward pressure came from President Donald Trump’s continued public criticism of Powell, including a suggestion that he would prefer Powell to resign before his term ends in May. Trump also reiterated his desire to slash interest rates to 1%, down from the current 4.25–4.5% range, and pledged to replace Powell with a more dovish Fed chair if re-elected.

The President’s tax-and-spend policy proposals—namely a massive $3.3 trillion fiscal stimulus package—have further spooked bond markets and raised concerns about the long-term sustainability of U.S. debt.

Currency Markets React to Shifting Sentiment

The dollar index (DXY), which tracks the greenback against six major currencies, inched up slightly to 97.276 but remained close to a three-year low of 96.933. The euro eased to $1.1716 after touching $1.1754 on Friday—its strongest since September 2021. Sterling traded around $1.3709, near a peak last seen in late 2021.

The dollar also showed historic weakness against the Swiss franc, dipping last week to 0.7955, a level unseen since January 2015. Against the yen, the dollar remained steady at 144.58.

The Australian dollar, considered a risk-sensitive currency, gained marginally to $0.6537 and approached a 7.5-month high on expectations that commodity-linked currencies would benefit from stabilizing trade relations and rising risk appetite.

Trade Developments Influence Currency Outlook

Investor sentiment was buoyed by comments from U.S. Treasury Secretary Scott Bessent, who confirmed progress in trade talks with China, including a resolution on critical rare earth mineral exports. He hinted that multiple trade deals could be finalized by Labor Day (September 1), even though Trump had initially set a July 9 deadline.

While some analysts remain skeptical about the timeline for concluding so many deals, signs of resolution in key disputes—such as with China—have improved global risk sentiment, which in turn has weighed on the traditionally defensive U.S. dollar.

Despite short-term bounces, the dollar remains under intense pressure from both domestic political dynamics and global economic rebalancing. The Fed’s growing dovish tilt, Trump’s policy volatility, and the fast-evolving trade landscape suggest further downside risks for the greenback—especially if upcoming payroll data or inflation reports reinforce the case for monetary easing.

Source: Reuters

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Economic

Strategic Move to Unlock Trade Dialogue

In a statement issued Sunday, Canada’s finance ministry confirmed the withdrawal of its digital services tax (DST), a policy that had long been a sticking point in discussions with Washington. The move is widely interpreted as a strategic olive branch to rekindle momentum in Canada–U.S. trade talks, which had stalled over various bilateral concerns, including digital taxation and cross-border data governance.

Canadian Prime Minister Mark Carney and U.S. President Donald Trump are set to meet in Washington to resume negotiations with an ambitious goal: reaching a finalized trade agreement by July 21.

Background on the Digital Services Tax Dispute

The DST, originally proposed to target large multinational tech companies earning revenue from Canadian digital users, had drawn strong opposition from the U.S., which viewed it as discriminatory against American firms. The tax was modeled after similar efforts in France and the UK but risked sparking retaliatory tariffs from Washington—especially under President Trump’s trade-first doctrine.

Its removal clears one of the most controversial barriers between the two countries, potentially setting the stage for broader economic cooperation.

Economic and Political Implications

By rescinding the DST, Prime Minister Carney appears to be aligning more closely with U.S. digital trade standards while also reducing the threat of trade friction at a time when both countries are facing growing economic pressures. The decision may also strengthen Canada's hand in negotiating terms on other critical areas such as auto exports, agricultural standards, and critical minerals cooperation.

The timing of this announcement suggests urgency, with July 21 set as the new target for a trade framework that could modernize the existing USMCA (United States–Mexico–Canada Agreement) or introduce an entirely new bilateral pact.

Canada’s decision to withdraw its digital services tax marks a significant shift in its policy posture—prioritizing strategic alignment and economic diplomacy over unilateral taxation. With Carney and Trump scheduled to meet soon, the coming weeks may bring renewed clarity on the future direction of North American trade.

Source: Reuters

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Commodity

Market Overview and Recent Volatility

Oil markets began the week under pressure, with Brent crude futures slipping to $67.11 per barrel and U.S. West Texas Intermediate falling to $64.58 per barrel. This roughly 1% decline reflects a swift unwinding of the geopolitical risk premium that had pushed prices above $80 per barrel earlier in June. That spike was triggered by a 12-day military conflict between Israel and Iran, marked by airstrikes and nuclear tensions, but quickly reversed following a ceasefire announcement from President Donald Trump.

The easing of tensions has returned attention to fundamentals—specifically, the prospect of rising global supply. Brent and WTI both posted their steepest weekly declines since March 2023, yet they remain on track for a second consecutive monthly gain of more than 5%, underscoring the volatility of recent trading sessions.

OPEC+ Supply Outlook: Incremental Pressure

The most immediate bearish catalyst stems from inside the oil producers' cartel. According to four OPEC+ delegates, the group is expected to approve another production increase—411,000 barrels per day for August—continuing a steady reversal of output cuts that began in April. This would mark the fifth consecutive monthly production hike, reinforcing expectations that supply will outpace demand growth during the remainder of the summer.

The official OPEC+ meeting on July 6 will be closely watched, especially as these incremental increases mirror the recent May to July hikes. Traders now anticipate a more predictable supply outlook, reducing upside risk and anchoring prices near the mid-$60s range.

U.S. Supply Trends: Mixed Signals

Interestingly, the U.S. oil supply picture adds complexity to the global balance. Baker Hughes reported a drop in active U.S. oil rigs to 432—the lowest since October 2021—signaling potential headwinds for domestic production growth. While this might ordinarily support prices, the magnitude of the expected OPEC+ boost appears to overshadow it in the short term.

Nonetheless, the rig count decline could become a bullish factor later in Q3 if global demand remains stable or rises and U.S. output fails to keep pace.

Investor Sentiment and Strategic Implications

Tony Sycamore of IG Markets noted that the market has effectively "stripped out" the geopolitical premium, suggesting that traders are now more sensitive to structural supply changes than to flashpoint risks in the Middle East. This shift in focus implies that speculative long positions fueled by war fears have likely been liquidated, bringing prices back in line with demand-supply dynamics.

Looking forward, continued pressure from supply-side developments—including from both OPEC+ and non-OPEC countries—may keep oil prices capped unless macroeconomic or seasonal demand shocks emerge. A flattening of the geopolitical curve, combined with the strategic unwinding of cuts, points to a more stable (if bearish-leaning) price environment in the near term.

While June closes with modest gains, the outlook for July leans bearish as the risk premium evaporates and OPEC+ prepares to raise output further. Unless U.S. rig declines lead to meaningful supply tightening or unexpected demand surges occur, oil is likely to remain subdued in the coming weeks—hovering in the $65–$68 range, barring renewed geopolitical shocks.

Source: Reuters

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Commodity

Legal Shields Against a Russian Energy Comeback

In a decisive shift away from past reliance on Russian energy, the German government under Chancellor Friedrich Merz is pursuing legal amendments to prevent any revival of the Nord Stream gas pipelines. These efforts, revealed through internal communications from the German Ministry for Economic Affairs to Green Party lawmakers, aim to reform investment control laws and tighten regulations on ownership transfers—key loopholes that might otherwise allow external actors, including those linked to Russia, to regain influence over the pipeline.

The Nord Stream system, once a cornerstone of Germany’s energy imports, has remained dormant since multiple explosions in 2022 disabled three out of four pipelines. Despite its inactive status, the infrastructure remains a geopolitical flashpoint. Concerns have grown over rumors that Russian or American business interests with Kremlin ties may seek to restore the project, possibly circumventing current sanctions.

Berlin’s Limited Legal Reach—and Its Response

At present, Berlin lacks the authority to intervene directly in ownership changes involving the Nord Stream operator, headquartered in Switzerland. While the German government can require technical certification if the project resumes, it cannot fully prevent its reactivation without new legal instruments.

To address this, Chancellor Merz is also lobbying the European Union to include a permanent ban on Nord Stream in its upcoming Russia sanctions package. Yet, EU consensus is elusive—Slovakia recently opposed this proposal, stalling its inclusion.

The German government's draft responses to Green Party lawmakers reaffirm its firm stance: Germany neither needs nor accepts pipeline gas from Russia, and none of its LNG terminals are importing Russian liquefied natural gas. This stance aligns with broader EU objectives to phase out Russian fossil fuels and diversify the continent’s energy supply.

The Lynch Factor and Contested Lobbying

U.S. investor Stephen Lynch, who has previously expressed interest in reviving Nord Stream, was invited to the Ministry for Economic Affairs on May 6 to present his plan. The ministry emphasized that the meeting was technical, with no senior officials attending. Lynch believes that Europe will eventually revert to Russian gas imports and that only one operational pipeline would suffice to meet demand—an assumption the German government flatly rejects.

Within Germany, the Nord Stream debate cuts across party lines. The far-right Alternative for Germany (AfD) party calls for reactivating the pipeline to lower energy prices and support industry. Some senior figures in the center-right CDU and center-left SPD have echoed similar economic concerns. But Berlin’s leadership remains adamant: re-engaging with Moscow for energy not only undermines EU sanctions but also weakens long-term energy diversification goals.

Russian officials have responded sharply. A spokesperson for Russia’s Foreign Ministry accused Europe of demonstrating “helplessness” in the face of Russia’s independent foreign policy, framing the effort to block Nord Stream as a sign of Western decline rather than strength.

Germany's legal maneuvering signals a broader effort within the EU to permanently close the chapter on Russian energy dominance. The move is both symbolic and structural: by attempting to lock out Nord Stream through law and sanctions, Berlin aims to reinforce the continent’s shift toward energy sovereignty. Yet internal political divisions and external lobbying efforts underscore the complexity of detaching from a past where Russian gas underpinned Europe’s industrial competitiveness. As the EU navigates energy security amid geopolitical upheaval, Germany’s decision could serve as a bellwether for the bloc’s future resilience and strategic alignment.

Source: Reuters

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Olivia Brooks

Economic

Political

US President Donald Trump characterized trade in cars between the US and Japan as unfair on Sunday, little more than a week before higher tariffs are set to kick in if a deal isn’t reached between the two nations.

“So we give Japan no cars. They won’t take our cars, right? And yet we take millions and millions of their cars into the United States. It’s not fair,” Trump said during a Fox News interview that aired Sunday.

“And I explained that to Japan. And they understand it. And we have a big deficit with Japan. And they understand that too,” he said in remarks. “Now, we have oil. They could take a lot of oil. They could take a lot of other things,” he added.

Japan’s top negotiator Ryosei Akazawa visited Washington DC last week for the seventh round of trade negotiations that have been ongoing for months, even extending his stay in hopes of hashing out a deal as the July 9 deadline for higher so-called reciprocal tariffs looms.

In a statement released by the Japanese government Sunday, Akazawa and his counterpart, US Commerce Secretary Howard Lutnick had a “fruitful discussion” and agreed to continue seeking a deal that is beneficial for both the US and Japan.

It was unclear from Trump’s statements in the interview whether Japan was close to reaching a deal or winning an extended reprieve from a jump in the across-the-board tariffs.

Trump said the US can set its trade terms with Japan unilaterally.

“I’m going to send letters,” Trump said on Sunday, referring to a plan to inform some trading partners that the US will unilaterally set tariffs. “I could send one to Japan. ‘Dear Mr. Japan, here’s the story. You’re going to pay a 25 percent tariff on your cars.’”