OPINION: Respond To Latest Tariff With Discipline, Diversification, And Strategic Engagement

Winkelmann

Economic

Political

Forex

Summary:

THE latest United States reciprocal tariff regime must be treated not as a temporary irritant but as a structural shift in global trade policy.

THE latest United States reciprocal tariff regime must be treated not as a temporary irritant but as a structural shift in global trade policy. Malaysia must respond with the discipline of a well-governed state, the agility of a competitive economy, and the foresight of a nation securing its long-term place in global supply chains. The 19% tariff now imposed on our exports — though reduced from the earlier threat of 24% to 25% — is backed by a non-mitigable, 40% transshipment tariff that replaces the base rate where [the US Customs and Border Protection or] CBP finds evasion. This is not merely a matter of price; it is a signal that our credibility in rules-of-origin compliance will determine our market access. We must therefore pursue three parallel strategies: securing targeted exemptions, tightening compliance to a zero tolerance standard, and deepening the value-added content of our exports.

Credibility, compliance, and carve-outs: A three-pillar response

First, government and industry must work together to preserve and expand carve-outs for priority sectors such as electrical and electronics, medical technology, aerospace, and other high-value industries. Negotiations must be anchored in the language of mutual benefit, linking US market access to Malaysia-based investments that serve American supply chain resilience. Washington is more likely to grant exemptions if we can demonstrate concrete contributions to their strategic industries, be it through advanced packaging in semiconductors, aerospace maintenance and repair, or specialised manufacturing for the medical sector.

Second, our posture on compliance must be unambiguous. Transshipment practices that skirt US rules will invite punitive action and erode trust. A national task force — bringing together Miti (the Ministry of International Trade and Industry), [the] Customs [Department], Mida (Malaysian Investment Development Authority), and industry bodies — should publish a clear, auditable guide to rules of origin, including substantial transformation tests, HS classification changes, and value-add thresholds. CBP has not yet fully specified the evidentiary tests for “transshipment” in public guidance, underscoring the need for airtight documentation.

High-risk sectors must maintain complete and rapid-access digital records for CBP audits, so that any challenge can be met with documentary proof.

Third, Malaysia must reduce reliance on imported intermediate goods from China that fail to meet origin standards. Where possible, production processes should be redesigned to create substantial transformation within Malaysia, shifting classification codes and ensuring clear origin claims. For components that cannot be relocated, we must reengineer value-addition steps to meet the legal requirements of US customs. The 90-day extension of the US–China tariff truce to Nov 10, 2025, buys time to clean up origin and routing practices.

Securing market access through discipline and strategic investment

Beyond compliance, we should take the offensive in investment diplomacy. Co-production agreements with US firms, joint ventures in high-technology manufacturing, and commitments to skilled job creation will strengthen Malaysia’s case for preferential treatment. Our approach must be specific: binding rulings on HS codes, airtight traceability systems, and supplier contracts that forbid unauthorised routing through third countries. At the same time, we must accept the economic reality of the tariff and build it into our pricing, hedge currency exposures, and where possible, use free trade agreements to reroute some exports to tariff-free markets in CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and RCEP (Regional Comprehensive Economic Partnership) member states.

This quarter, the priority is speed and clarity. The government should publish a unified origin compliance guide, launch a voluntary disclosure mechanism for minor past infractions, and accelerate negotiations for sector-specific exemptions backed by investment commitments. Exporters must immediately map their US-bound products by tariff exposure, strengthen their documentation, and pivot where necessary to markets and product lines less affected by the new duties.

In trade, credibility is capital. Once lost, it is costly to regain. By acting with discipline, building trust with trading partners, and investing in the capabilities that matter to global industries, Malaysia can turn this period of tariff pressure into a moment of renewal. Those who wait for the storm to pass will find themselves weaker. Those who adapt now will shape the trade map of the next decade.

Source: Theedgemarkets

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Michelle

Economic

Forex

U.S. business activity picked up pace in August, led by a resurgent manufacturing sector that saw the strongest growth in orders in 18 months, a purchasing managers survey showed on Thursday.

S&P Global's flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 55.4 this month, the highest level since December, from 55.1 in July. A reading above 50 indicates expansion in the private sector.

“A strong flash PMI reading for August adds to signs that US businesses have enjoyed a strong third quarter so far," Chris Williamson, chief business economist for S&P Global Market Intelligence, said in a statement. "The data are consistent with the economy expanding at a 2.5% annualized rate, up from the average 1.3% expansion seen over the first two quarters of the year."

The improvement came largely from the manufacturing sector, where the flash PMI surged to 53.3 - the highest since May 2022 - from 49.8 in July and defying economists' expectations for a second month of contraction.

Manufacturing received a bump from new order activity at the highest since February 2024.

The services sector, meanwhile, eased back to 55.4 from 55.7 in July. Economists polled by Reuters had forecast the services PMI slipping to 54.2.

The survey's measure of prices paid by businesses for inputs edged up to a three-month high of 62.3 from 61.3 last month, with both the services and manufacturing sectors reporting higher costs and companies citing President Donald Trump's tariffs as the key driver behind the increase.

"Companies across both manufacturing and service sectors collectively reported the steepest rise in input prices since May and the second-largest increase since January 2023," the report said. "Rates of increase accelerated in both sectors."

The survey's measure of prices charged by businesses for goods and services rose to a three-year high of 59.3 in an indication that companies are increasingly passing along the costs from higher tariffs to consumers.

Employment also improved, the survey showed. The composite employment index for both manufacturing and services rose to 52.8, the highest since January, from 51.5 in July.

Source: Reuters

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Adam

Economic

One small nugget buried in the minutes: foreign holdings of US assets look stable.

All About Jackson Hole

The July FOMC minutes hit the tape last night and barely stirred the dollar’s drink. Whatever hawkish tint traders tried to extract was stale — a snapshot taken before the July jobs rug-pull. The Fed’s language on a “solid” labor market now reads like yesterday’s newspaper, lining the bin after payrolls turned soft.

The street has already shifted its gaze forward, waiting to hear Powell at Jackson Hole tomorrow. He’s the one who will tell us if the Fed’s compass has recalibrated after those back-month revisions exposed the labor market as more fragile than policymakers dared to admit.

Bostic steps up first this afternoon, and he’s been dropping hints that a cut this year is on his dance card — but only one, a trim rather than a cycle. Traders will tune in, though the real orchestration belongs to Powell on Friday.

One small nugget buried in the minutes: foreign holdings of US assets look stable. That’s quietly supportive for the dollar, a rebuttal to all the “sell America” doom-porn making the rounds when tariffs hit the headlines. No exodus, no capital strike — just steady hands abroad, which keeps the greenback from wobbling.

The US calendar today offers up jobless claims, flash PMIs, and existing home sales. None are likely to set the world ablaze, but they’ll keep traders busy until the main act in Wyoming. Political noise around Lisa Cook’s potential resignation gave the dollar a flicker yesterday, but the market’s long since learned to fade Washington theatrics. After all, Powell himself is a frequent target of presidential fire, and yet the Fed still mans the tiller.

On the euro side, the story tilts heavier. Optimism around a ceasefire in Ukraine is evaporating as fast as oil prices are rising. Gas and crude have both gone bid in the last 24 hours — an energy shock that plays dollar-positive and euro-negative. Lavrov’s line that China must be part of any security guarantees only underlines how wide the diplomatic canyon still runs.

Trump’s recent soft touch with Beijing might be tactical, but geopolitics has a way of snapping back like an overstretched band. Secondary sanctions are the card still waiting in Washington’s pocket.

Eurozone PMIs land today, with little expectation for a rebound. EUR/USD is treading water, but the breakout key is still Powell’s speech tomorrow. Traders want to know whether he resists the market’s conviction that September delivers the first 25bp cut, with odds hovering north of 80% despite hotter PPI cooling the enthusiasm. A full 50bp is still priced for year-end, but that path depends on Powell’s tone.

The bond market is already whispering the script: 10s steady near 4.29%, 2s at 3.75%, and the curve steepening as traders front-run the Fed’s pivot. Risk assets and beta FX are the ones with skin in the game here. If Powell pulls the punch bowl back on Friday, disappointment could wash through equities and carry trades alike. If he gives the market its nod, the dollar bleeds lower and gold shines brighter.

Right now, it’s not about parsing old minutes. It’s about listening for Powell’s signal. Until then, the dollar sits in neutral, waiting for the ignition.

Trader View: Powell To Support A September Rate Cut

Jackson Hole weekend is where central bankers step out of their ivory towers, slip on the fleece vests, and try to convince markets they’ve got control of the wheel. Sometimes it’s theatre, sometimes it’s policy history in the making. This year, it’s about Powell standing on stage with a choice: acknowledge the cracks in the labor market and open the September door wider, or hide behind academic nuance and leave traders dangling until payrolls and CPI drop in early September.

Either way, the stakes are higher than the mountains surrounding Wyoming.

For years, Jackson Hole has been the Fed’s launchpad for regime shifts. 2019 gave us easing hints. 2020 delivered FAIT, a framework shift that aged like milk and lit the fuse for the hottest inflation run since Volcker’s days. 2021 was the taper foreshadow. 2022 slammed “higher for longer” into the tape. 2023 softened into “proceed carefully.” Powell knows history remembers what gets said here. Markets do too. That’s why even if positioning is subdued, the event commands attention.

The theme this year — “Labor Markets in Transition” — couldn’t be better timed. The July payroll report detonated the idea of a solid labor backdrop, not just missing expectations but dragging May and June lower with ugly revisions. Net revisions of –258k gutted the narrative, and Powell himself had already warned in July that headline hiring may, after revisions, prove close to zero.

The job market isn’t imploding, but the breakeven job growth rate has collapsed, immigration and aging demographics are pinching labor supply, and the unemployment rate holding at 4.2% suddenly feels less like stability and more like the calm before layoffs accelerate.

Markets wasted no time. September cuts are 80% priced, and futures traders are debating whether the real option is 25bps or 50bps. Fifty is unlikely — Powell won’t blow the door off before NFP and CPI in early September — but he could shade the message dovish enough that the cut is all but baked.

A strong signal Friday would effectively front-run those prints, and history suggests Powell prefers optionality. But in a market conditioned to pounce on nuance, even a modest tilt toward “labor risks outweigh inflation” will be enough to lock September in.

The balancing act is messy. Powell can’t be seen as panicking about jobs without sparking fresh inflation fears. Push too hard on the employment side and traders will run with “the Fed is reflating.” Hold too tight to inflation and the Fed risks looking blind to deterioration that’s already in plain sight. Powell’s challenge is to sell a cut as risk management — not capitulation. The Fed has long lived in the rearview mirror, but this is one of those moments where forward guidance matters.

Beyond Powell, the backdrop matters. Trump’s shadow looms: he could soon re-shape the Fed board, potentially adding three new governors if Powell steps aside and other seats come open. The institution’s credibility, already bruised by the FAIT debacle and the slow inflation response, is under pressure. Markets know politics and policy are colliding, and Jackson Hole is the stage where those crosswinds get acknowledged, even obliquely.

Desks are split on how much Jackson Hole matters this time. Some call it inconsequential — the real dice roll comes with September’s data. But the pattern across the past five years is clear: Powell rarely steps up to this podium without moving markets. Options markets are oddly ignoring that, smashing implied volatility as if nothing could surprise. That’s complacency. Traders know that when vols are cheap and risk is mispriced, you don’t fade the possibility of fireworks.

So here’s the setup heading into the weekend:

Scenario one: Powell leans dovish, stressing labor market risks, downplaying tariffs as one-offs, and nudging markets toward September cuts. Dollar softens, bonds rally, equities breathe.

Scenario two: Powell hedges, keeps “well-positioned to wait” language, punts to September data. Market pricing wobbles, longs take profits, and positioning resets.

Scenario three: A true curveball — Powell resurrects pre-emptive tightening rhetoric under the banner of “framework review.” That would shock a market leaning dovish and torch bonds.

History suggests scenario one is most likely. Powell won’t decisively pre-commit, but the tone will matter. If he reinforces that jobs risk trumps inflation stickiness, traders will have their green light. If he clings to ambiguity, then September 5 NFP and September 11 CPI become the final referees.

Either way, this isn’t just another academic conference. It’s a policy inflection point with global spillovers. And while the fleece vests and mountain scenery may project calm, the reality is this: Powell knows the table is watching, the dice are in his hand, and one slip of tone can move billions.

Source: investing

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Adam

Commodity

Market Overview

Gold and silver drifted lower in Asian trading as investors digested the Federal Reserve’s July meeting minutes, which reinforced concerns over persistent inflation. The minutes revealed that nearly all policymakers backed holding interest rates steady, but emphasized that inflation remains a larger risk than labor market weakness.

Analysts noted that this reduced the likelihood of a September rate cut, curbing investor appetite for non-yielding assets like gold and silver.

“The Fed appears to be keeping its tightening bias alive, and that makes it difficult for precious metals to build sustained momentum,” said a Singapore-based commodities strategist. The US Dollar extended gains on the hawkish tone, adding to the headwinds for metals priced in the greenback.

Geopolitical Shifts and US Political Risks

The metals market also absorbed geopolitical and political developments that shaped investor sentiment. Optimism surrounding potential progress in Russia-Ukraine peace efforts has eased safe-haven demand. Russian Foreign Minister Sergey Lavrov reiterated that any security arrangement would be incomplete without Moscow’s involvement, underscoring the complexity of negotiations.

Meanwhile, US domestic politics injected uncertainty into markets. Former President Trump’s demand for the resignation of Federal Reserve Governor Lisa Cook over alleged mortgage fraud has stirred debate about central bank independence.

Political instability, while weighing on the US Dollar’s long-term outlook, has provided limited support for gold and silver in the near term.

Investors Await Powell’s Jackson Hole Address

Looking ahead, investor attention is firmly on Fed Chair Jerome Powell’s upcoming remarks at the Jackson Hole Symposium. Markets expect Powell to offer critical guidance on the policy path, particularly regarding the balance between inflation risks and slowing growth.

Alongside Powell’s speech, flash PMIs, weekly jobless claims, and the Philadelphia Fed Manufacturing Index will provide essential signals on global economic momentum.

For now, gold and silver remain caught between the opposing forces of hawkish monetary policy and pockets of geopolitical uncertainty. Until clear direction emerges from the Fed, the metals market is likely to remain volatile, with traders closely tracking macroeconomic data and central bank commentary.

Short-Term Forecast

Gold remains choppy near $3,340, supported at $3,333 with resistance at $3,359. Silver trades around $37.82, holding support at $37.50; a break above $38.29 may extend gains toward $38.71–$39.19.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is trading near $3,340, holding above immediate support at $3,333 while facing resistance at $3,359. Price action remains choppy, but the ascending trendline from late July underpins a broader bullish structure.

The 50-EMA ($3,338) and 100-EMA ($3,343) are converging, signaling indecision, while the RSI at 53 reflects neutral momentum with slight upside bias.

A close above $3,359 could open the door toward $3,375 and $3,402, while failure to hold $3,333 risks a deeper pullback to $3,318 and $3,306.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver (XAG/USD) is trading around $37.82, consolidating below resistance at $37.93 while holding support at $37.50. Price is squeezed within a descending triangle, with the 50-EMA ($37.79) and 100-EMA ($37.86) acting as near-term pivot levels.

The RSI sits at 55, suggesting mild bullish momentum but not yet signaling strong conviction. A breakout above $38.29 could clear the path toward $38.71 and $39.19, while failure to hold $37.50 risks a slide toward $37.06 and $36.67.

Source: fxempire

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Adam

Cryptocurrency

Digital assets are losing ground as traders brace for Federal Reserve Chair Jerome Powell’s closely watched address at the Jackson Hole Symposium on Friday.

Spot Bitcoin and Ether exchange-traded funds in the US have logged four straight sessions of outflows, with investors pulling a net $1.9 billion, according to data compiled by Bloomberg.

A broad rally in cryptocurrencies drove Bitcoin to a record on Aug. 14, while pushing Ether to within touching distance of its own all-time high. That momentum — fed by an array of corporate crypto accumulators built in the mold of Michael Saylor’s Strategy — now appears to be dwindling.

Bitcoin Traders Jittery Ahead of Powell’s Jackson Hole Speech_1

Options activity shows traders turning defensive. The put-to-call ratio for Aug. 22 contracts jumped to 1.33 on Deribit, the derivatives exchange, with $3.8 billion in Bitcoin options expiring. The largest open interest is in $110,000 puts, signaling concern over a near-term pullback as traders seek downside protection. Put options offer downside insurance by giving contract holders the right to sell at a certain price.

“What the put-call ratio tells you is that, given high expectation of rate cuts in Sept., the market is more sensitive to the risk of Powell sounding hawkish than dovish,” said Peter Chung, head of research at Presto. “The market gyrations over the last few days is the result of investors positioning themselves for an uncertain outcome of the speech.”

Bitcoin Traders Jittery Ahead of Powell’s Jackson Hole Speech_2

Bitcoin fell 0.7% to $113,624 as of 9:45 a.m. in London, extending its retreat to 9% from its record of $124,514. Ether, the second-largest token, slid 1.6% to $4,288.

President Donald Trump has repeatedly criticized Powell’s cautious approach to rate cuts. Treasury Secretary Scott Bessent recently said he expects Trump to announce Powell’s replacement by year-end, making Friday’s Jackson Hole address likely his last as Fed chair.

Minutes from the Fed’s last policy meeting, released yesterday, underscored that officials still see inflation risks as outweighing employment concerns, even as new tariffs are expected to take time to feed into the economy. That backdrop has reinforced bets that Powell’s tone could temper hopes for aggressive easing.

“The FOMC meeting minutes released overnight indicated that the impact of new tariffs is expected to take time to materialise. Additionally, a majority of members viewed inflation risks as outweighing employment risks, signalling a continued cautious stance on rate cuts,” said Tony Sycamore, analyst at IG Australia Pty.

Source: Bloomberg

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Michelle

Political

Russian President Vladimir Putin is prepared to meet Ukrainian President Volodymyr Zelenskiy but all issues must be worked through first and there's a question about Zelenskiy's authority to sign a peace deal, Putin's foreign minister said on Thursday.

Putin and U.S. President Donald Trump met on Friday in Alaska for the first Russia-U.S. summit in more than four years and the two leaders discussed how to end the deadliest war in Europe since World War Two.

After his summit talks in Alaska, Trump said on Monday he had begun arranging, opens new tab a meeting between the Russian and Ukrainian leaders, to be followed by a trilateral summit with the U.S. president.

Asked by reporters if Putin was willing to meet Zelenskiy, Foreign Minister Sergei Lavrov said: "Our president has repeatedly said that he is ready to meet, including with Mr. Zelenskiy".

Lavrov, though, added a caveat: "With the understanding that all issues that require consideration at the highest level will be well worked out, and experts and ministers will prepare appropriate recommendations.

"And, of course, with the understanding that when and if - hopefully, when - it comes to signing future agreements, the issue of the legitimacy of the person who signs these agreements from the Ukrainian side will be resolved," Lavrov said.

Putin has repeatedly raised doubts about Zelenskiy's legitimacy as his term in office was due to expire in May 2024 but the war means no new presidential election has yet been held. Kyiv says Zelenskiy remains the legitimate president.

Russian officials say they are worried that if Zelenskiy signs the deal then a future leader of Ukraine could contest it on the basis that Zelenskiy's term had technically expired.

Zelenskiy said this week Kyiv would like a "strong reaction" from Washington if Putin were not willing to sit down for a bilateral meeting with him.

WAR OR PEACE?

European leaders say they are sceptical that Putin is really interested in peace, but are searching for a credible way to ensure Ukraine's security as part of a potential peace deal with minimal U.S. involvement.

Lavrov said it was clear that neither Ukraine nor European leaders wanted peace. He accused the so-called "coalition of the willing" - which includes major European powers such as Britain, France, Germany and Italy - of trying to undermine the progress made in Alaska.

"They are not interested in a sustainable, fair, long-term settlement," Lavrov said of Ukraine. He said the Europeans were interested in achieving the strategic defeat of Russia.

"European countries followed Mr. Zelenskiy to Washington and tried to advance their agenda there, which aims to ensure that security guarantees are based on the logic of isolating Russia," Lavrov said, referring to Monday's gathering of Trump, Zelenskiy and the leaders of major European powers at the White House.

Lavrov said the best option for a security guarantee for Ukraine would be based on discussions that took place between Moscow and Kyiv in Istanbul in 2022.

Under a draft of that document which Reuters has seen, Ukraine was asked to agree to permanent neutrality in return for international security guarantees from the five permanent members of the U.N. Security Council: Britain, China, France, Russia and the United States.

Any attempts to depart from the failed Istanbul discussions would be hopeless, Lavrov said.

At the time, Kyiv rejected that proposal on the grounds that Moscow would have held effective veto power over any military response to come to its aid.

Source: Reuters

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Warren Takunda

Economic

The British Pound was lifted by PMI data for August that handily beat expectations, although the details in the report is likely limiting the currency's upside ambitions.

GBP/EUR rose from 1.15440 to 1.1554 in the minutes following news the UK economy's private sector likely expanded comfortably in August, retracing some of the previous day's decline.

The S&P Global Composite PMI for August rose to 53 from 51.5 in June, beating consensus predictions for an outcome of 51.6.

The GBP/USD rose to 1.3460 from 1.3454 prior to the release.

The services sector drove the expansion, with the Services PMI rising to 53.6 from 51.8. The Manufacturing PMI was nevertheless stuck in the sub-50 contraction zone at 47.30, down from 48 in June.

Despite the comfortable beat in expectations, the Pound's advance looks to be rather tepid compared to reactions that followed similar significant surprises in the past.

It echoes the subdued response that followed Wednesday's consensus-defying rise in UK inflation figures, which lowered analyst expectations for a November interest rate cut at the Bank of England.

The S&P Global survey revealed that new business volumes expanded at the strongest pace since October 2024, implying strong growth ahead.

However, the relatively subdued tone of Sterling exchange rates likely reflects findings that "Employment was again a weak spot as total workforce numbers decreased for the eleventh month running and at a marked pace."

Financial markets might be looking through the current rise in inflation and uptick in private sector activity, judging that widespread evidence of an employment slowdown points to weakness in the coming months.

Financial market pricing shows investors are lowering the odds of rate cuts for the remainder of 2025, but they are pricing in more rate cuts for 2026. In short, the deterioration in the labour market - which today's PMIs corroborate - points to a backloaded pattern of cuts.

This is proving a headwind to the Pound.

Fears that the UK is entering a period of stagflation is also unhelpful to those wanting a stronger Pound. The August PMI report finds: "Input cost inflation meanwhile edged up to its highest since May. Survey respondents continued to note that suppliers had sought to pass on increased National Insurance costs."

Higher payroll costs also resulted in another robust rise in prices charged by private sector firms in August, with service providers recording particularly strong inflationary pressures, said S&P Global. On Wednesday the ONS reported services sector inflation spiked to 5.0% in July, which is also giving markets reason to think the Bank of England will delay cutting rates further.

Pound Sterling Ticks Higher Against Euro and Dollar After Strong PMI_1

Above: Official payroll data from the ONS paints a clear picture of politically-induced labour market deterioration.

"Payroll numbers also continue to be cut at an aggressive rate by historical standards as firms cite weak order books and concerns over rising staff costs due to the policies announced in the autumn Budget, which also contributed to persistent inflation pressures," says Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"We are very sceptical that this solid performance will last," says Matthew Ryan, Head of Market Strategy at Ebury. "A hotter than usual summer is likely to be buoying the services sector, notably helping to prop up retail, tourism and hospitality activity. This will likely prove to be no more than a temporary sugar rush, however, rather than a sustained boom."

Ebury expects growth to moderate during the rest of the year, with rising labour costs, high inflation and acute fiscal policy uncertainty set to trigger a tightening of the belts among business owners and consumers alike in the coming months."