Tariff Pause Brings Modest Lift to Chinese Manufacturing, But Weakness Persists

Economic

China–U.S. Trade War

Summary:

China’s factory activity edged up in June as the U.S. delayed higher tariffs, offering a short-term reprieve. However, the sector remained in contraction...

Short-Term Rebound Fails to Lift Broader Outlook

China’s factory output showed a slight improvement in June following U.S. President Donald Trump’s decision to delay a new round of tariffs for 90 days. The latest Purchasing Managers’ Index (PMI), released by China’s National Bureau of Statistics, rose marginally from 49.5 in May to 49.7 — still below the neutral 50-point threshold, signaling that overall manufacturing remains in contraction.

The delay, agreed upon in early May, temporarily halted the imposition of more aggressive tariffs on Chinese goods. This gave manufacturers an incentive to expedite production and shipping during the tariff reprieve, creating a modest uptick in activity. However, this rebound has largely benefitted large industrial firms, while small and mid-sized enterprises continue to face contraction, weakening hiring and export momentum.

Limited Gains Amid Global Supply Chain Tensions

Despite the uptick, new export orders remain in decline and below the expansion threshold, reflecting tepid global demand and persistent uncertainty over long-term trade relationships. The manufacturing boost was not enough to change broader sentiment, with hiring activity slipping further.

This trend reflects a wider regional pattern. Japan’s industrial output rose by just 0.5% in May, far below the forecasted 3.5% rise, indicating that Japanese manufacturers are not capturing lost Chinese demand due to the tariff regime. Similarly, South Korea reported a 2.9% decline in all-industry output in May compared to the same period last year. Semiconductor and vehicle production — key exports — fell 2% and 2.3%, respectively, signaling broad weakness in regional supply chains.

Countdown to Tariff Resumption Intensifies Risks

The modest reprieve may be short-lived. President Trump reiterated over the weekend that the 90-day tariff pause — due to expire for most countries on July 9 and for China in early August — will not be extended. He emphasized the U.S. would begin notifying trading partners that higher tariffs will resume unless satisfactory agreements are reached.

While a rare earth export deal was reached with Beijing, fundamental issues remain unresolved. Trump maintained that tariffs will remain central to forcing a "fairer" trade balance, citing the large U.S. trade deficit with China as justification. Despite stating that getting along with China is beneficial, he confirmed that higher duties remain on the table.

Manufacturing Gasp Highlights Fragility

The uptick in Chinese PMI data reveals how sensitive factory activity is to short-term policy shifts. However, the persistence of sub-50 readings highlights structural challenges that remain unsolved — including weakening global demand, export volatility, and domestic sectoral imbalances. As the deadline for tariff reinstatement approaches, the uncertainty is likely to weigh further on Asia's manufacturing sector, especially in the absence of substantive trade breakthroughs.

The fragile rebound, buoyed only by temporary policy pauses, may fade as geopolitical tensions and protectionist rhetoric once again rise to the surface.

Source: AP

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James Whitman

Economic

Britain's economy expanded at its fastest pace in a year in the first three months of 2025 as homebuyers rushed to beat a deadline on property purchases and manufacturers sped up output ahead of U.S. President Donald Trump's higher import tariffs.

Gross domestic product grew by 0.7% in the first three months of 2025, confirming a preliminary estimate and the fastest pace since the first quarter of 2024, the Office for National Statistics said.

Growth in March alone was revised up to 0.4% from a previous reading of 0.2% but the increase was not enough to bump up the quarterly growth reading, the ONS said.

Household expenditure grew by 0.4% in the January-to-March period, revised up from an initial estimate of an increase of 0.2%, driven by housing and household goods and services as well transport.

The jump in Britain's economic output in early 2025 is not expected to last into the rest of this year.

Data has already shown that gross domestic product fell by 0.3% in April from March although the drop was exacerbated by one-off factors.

Britain's property market saw a sharp increase in activity in the run-up to the March 31 expiry of tax break for some homebuyers.

The ONS said manufacturing grew by a strong 1.1% in the first quarter - ahead of the increase in U.S. import tariffs in April - compared the last three months of 2024.

"The saving ratio fell for the first time in two years this quarter, as rising costs for items such as fuel, rent and restaurant meals contributed to higher spending, although it remains relatively strong," ONS director of economic statistics Liz McKeown said.

Source: Reuters

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Gerik

Economic

Diplomatic Push to Preserve Preferential Tariff Rate

In a critical moment for Thai-U.S. trade relations, Finance Minister Pichai Chunhavajira has departed for Washington to participate in two days of negotiations aimed at protecting Thailand from the steep tariffs President Donald Trump imposed earlier this year. The country is at risk of facing duties as high as 36% if a deal is not reached before the expiration of a temporary tariff moratorium on July 9.

On a Thai news broadcast, Pichai expressed cautious optimism, stating, “I hope that no matter how much [the tariff is], it won't be more than anyone else's.” This underscores Thailand’s primary goal: to secure equal treatment and avoid being singled out among America’s trading partners.

Currently, the U.S. has set a default tariff rate of 10% for most countries engaged in ongoing negotiations. However, those that fail to strike a formal agreement by the deadline may see their rates revert to the more punitive levels announced on April 2, a scenario Thailand is eager to avoid.

Rising Stakes Amid Trump’s Tariff Shakeup

The high-stakes negotiations are part of President Trump’s broader push to renegotiate trade relationships with dozens of countries under the pretext of correcting imbalances and promoting domestic manufacturing. Thailand, like many other U.S. trading partners, finds itself caught between the urgency of defending export interests and the uncertainty of Trump’s unpredictable trade policies.

Earlier this month, Commerce Minister Pichai Naripthaphan indicated that the two sides were making progress and that Thailand could secure a favorable outcome — potentially keeping its tariff rate at 10% if a deal materializes.

Nevertheless, the clock is ticking. The Thai government has also floated the possibility of requesting an extension to the moratorium, which would buy more time for negotiations. Whether such a request will be granted remains unclear amid the White House’s tightening rhetoric and last-minute demands in other ongoing talks.

Implications for Thai Exports and Economic Stability

If the 36% tariff is imposed, it could significantly impact Thailand’s key export sectors, particularly electronics, automotive parts, and agricultural goods — all of which rely heavily on competitive pricing in the U.S. market. Higher duties would erode profit margins, disrupt supply chains, and potentially lead to job losses in Thailand’s export-driven economy.

At a broader level, the outcome of these talks will serve as a bellwether for how smaller U.S. trading partners are treated under Trump’s revised trade strategy — especially those that lack the leverage of larger economies like the EU, India, or China.

With little time left and much at stake, Thailand’s delegation faces a critical diplomatic challenge in Washington. Their ability to secure fair treatment, or at the very least maintain parity with other nations, will not only affect near-term economic outcomes but also shape future Thai-U.S. trade dynamics. As the July 9 deadline looms, Bangkok’s path forward hangs in the balance.

Source: Reuters

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Gerik

Economic

Reality Check on Trump’s "Trade Overhaul" Vision

Despite early promises of “90 deals in 90 days” following the April 2 tariff shock, the Trump administration is now expected to announce only a limited number of bilateral trade frameworks, many of which fall short of resolving deep-rooted structural issues. Most agreements focus on narrow, sector-specific concessions, with numerous key details deferred to future talks.

According to trade law experts, these outcomes don’t meet the traditional definition of trade agreements. “They’ll be called trade deals, but likely lack substance,” said Tim Meyer of Duke University, emphasizing the symbolic rather than economic weight of these pacts.

Tariff Threats and Retaliation Risks

Countries that fail to strike a deal before the July 9 deadline may face tariffs reverting to the elevated levels imposed in April — up to 25% in some cases. Treasury Secretary Scott Bessent has said countries seen as negotiating “in good faith” may retain the lower 10% rate, but even this guidance has been undercut by President Trump’s inconsistent statements. In a press conference, he asserted, “We can do whatever we want,” and floated the idea of blanket 25% tariffs, further fueling uncertainty.

Trump abruptly terminated trade talks with Canada over its digital services tax, prompting Ottawa to repeal the measure in hopes of reopening negotiations. While some interpreted this move as a diplomatic victory, others see it as a warning to other nations that defiance will be met with swift tariff retaliation.

A Patchwork of Partial Progress

Deals are reportedly near with Taiwan, Indonesia, Vietnam, and South Korea, and talks are progressing with India and the EU. Yet observers expect many of these to be preliminary frameworks that leave thorny issues like digital taxes, rare earths, and industrial subsidies unresolved.

Past deals offer cautionary tales: the UK accepted a framework under the assumption that steel and aluminum tariffs would be lifted, only to find 25% levies remain in place. Likewise, Trump’s claims that China would resume rare earths exports have yet to materialize, deepening skepticism about the follow-through on trade pledges.

Uncertain Legal Terrain

The legality of Trump’s tariff regime also remains unsettled. In May, the U.S. Court of International Trade ruled most of the tariffs illegal, citing misuse of emergency powers. However, an appeals court has allowed the measures to continue until a hearing in late July, casting further doubt on the administration’s strategy.

This legal limbo leaves U.S. businesses and global partners in a state of limbo, uncertain whether current trade terms will survive the summer.

Market Volatility and “TACO” Diplomacy

Financial markets have grown wary of Trump’s brinkmanship. The unpredictable cycle of threats and partial retreats has become so common that investors have coined the term “TACO” — short for “Trump Always Chickens Out” — reflecting the pattern of harsh rhetoric followed by tactical pullbacks.

Although some short-term concessions have been won, the broader reform of global trade imbalances remains elusive. Critics argue that Trump’s focus on headlines over substance may deliver political theatre, but little durable economic value.

Public and Political Backlash Grows

Recent polling shows that Trump’s trade policy is increasingly unpopular. A Quinnipiac University poll from early June found 57% of voters disapprove of his trade agenda. The growing discontent may weigh on his re-election strategy, particularly if tariffs begin to raise consumer prices or lead to foreign retaliation.

With time running out and pressure mounting on multiple fronts — from allies, businesses, courts, and voters — the president’s “deal-making” strategy appears more vulnerable than ever to both domestic and global scrutiny.

A Narrow Window for Resolution

As July 9 approaches, the world is watching to see if Trump delivers meaningful deals or simply rebrands partial concessions as diplomatic victories. Either way, the risk of economic dislocation remains high — especially if retaliatory tariffs emerge or legal rulings nullify the administration’s trade actions.

The coming days could define the future trajectory of U.S. trade relations — or signal the limits of a go-it-alone strategy in an interdependent global economy.

Source: Reuters

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Glendon

Economic

Forex

The UK economy grew strongly in the first quarter of the year, official data confirmed Monday, before the Labour government’s tax hikes and extra US tariffs came into effect.

The Office for National Statistics said UK gross domestic product rose 0.7% in the first three months of the year, unrevised from the first estimate published in May. It was the strongest quarterly performance in a year and made Britain the fastest-growing of the Group-of-Seven economies.

The savings ratio declined to 10.9% in the first quarter, down 1.1 points from a historically high level. The fall was driven by people saving less outside their pensions.

The outlook has darkened since the start of April amid a sharp drop in employment, weak retail sales and plunging exports to the US. BOE Governor Andrew Bailey recently warned of weak underlying growth as businesses pause investment and consumers hold back on spending.

Chancellor of the Exchequer Rachel Reeves’ £26 billion ($36 billion) increase in a payroll tax kicked in at the start of April, a measure she said was necessary to shore up the public finances but which has also been blamed for denting sentiment and pushing up food prices. At the same time, US President Donald Trump unleashed a wave of global tariffs, knocking economic prospects even though the UK struck a partial deal to lessen some of the impact on British exports.

Source: Bloomberg Europe

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Gerik

Economic

Strategic Resources Take Center Stage in Trade Diplomacy

Indonesia’s senior economic minister, Airlangga Hartarto, announced Monday that Jakarta has formally offered Washington an opportunity to co-invest in a major critical minerals initiative. The move comes as part of broader tariff discussions between the two nations, positioning natural resource cooperation as a lever to unlock concessions on trade.

This strategic proposal reflects Indonesia’s push to capitalize on its rich reserves of key minerals such as nickel, cobalt, and rare earth elements — all vital components in electric vehicle batteries, electronics, and renewable energy infrastructure. By involving the U.S. in upstream resource development, Indonesia is seeking to deepen bilateral ties and reduce future exposure to trade-related disruptions.

Danantara Indonesia at the Core of the Partnership

The proposed joint project will be managed by Danantara Indonesia, the country's sovereign wealth fund. This inclusion signals Jakarta's intention to ensure both transparency and strategic alignment in managing national resource assets. Danantara's participation would likely facilitate smoother financial structuring and oversight, offering the U.S. a more stable and state-backed investment framework.

While full details of the project — including location, resource type, and scale — have yet to be disclosed, officials suggest the plan could provide the U.S. with direct access to critical minerals outside of China, aligning with Washington’s ongoing efforts to diversify its supply chains.

Geopolitical and Economic Context

The proposal is particularly timely as the U.S. government accelerates its global search for alternative critical mineral sources amid rising tensions with Beijing. U.S. officials have repeatedly stressed the need for “friend-shoring” supply chains, and Indonesia, the world’s largest nickel producer, represents a compelling partner.

The announcement also coincides with President Donald Trump’s ongoing efforts to renegotiate tariffs and trading terms with key partners in Asia, including Vietnam and Japan. Offering U.S. investors a stake in resource extraction and processing could make Indonesia more attractive as a long-term trade and industrial ally.

Implications and Outlook

If successful, the joint investment initiative could reshape Indonesia-U.S. trade relations, shifting the focus from commodity exports to collaborative resource development. It could also position Indonesia more firmly within the U.S.-led economic security network in the Indo-Pacific region.

Analysts will be watching whether this offer leads to meaningful concessions in U.S. tariff policy or investment incentives, particularly in the electric vehicle and battery manufacturing sectors. The outcome could also set a precedent for other resource-rich ASEAN countries negotiating with Washington.

Further details on the project and formal responses from the U.S. Trade Representative’s office are expected in the coming weeks.

Source: Reuters

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FastBull Featured

Daily News

[Quick Facts]

1. German Corporate Bankruptcies hit ten-year high in first half of year.

2. Trump's "Big and Beautiful" Bill clears key Senate hurdle; Democrats employ delaying tactics.

3. The United States has reached an agreement with G7 members to establish a "parallel" system to avoid a global tax war.

4. Yemen's Houthis vow to continue attacks against Israel.

5. Japanese poll shows Prime Minister Shigeru Ishiba's cabinet support below 30% for fourth consecutive month.

6. Trump hopes Powell resigns, vows not to appoint Fed Chair who won't cut rates.

7. U.S. firms to gain exemptions from parts of Global Minimum Tax under G7 Deal.

8. Yemen's Houthis vow unabated attacks on Israel.

9. OPEC+ poised for another major output hike in August.

10. April GDP report signals imminent Bank of Canada rate cut.

11. Core PCE inflation edges higher while consumer spending unexpectedly contracts.

[News Details]

German Corporate Bankruptcies hit ten-year high in first half of year

Data recently released by German credit rating agency Creditreform shows that in the first half of this year, the number of corporate bankruptcies registered in Germany reached 11,900, a 9.4% increase compared to the same period last year, reaching the highest level in ten years. Patrik-Ludwig Hantzsch, the agency's economic expert, stated that German companies are facing multiple challenges, including weak demand, rising costs, and uncertainty. He predicts that the number of corporate bankruptcies in Germany will keep growing until the end of this year.

Trump's "Big and Beautiful" Bill clears key Senate hurdle; Democrats employ delaying tactics

On June 28th local time, the US Senate passed a procedural motion by a vote of 51 to 49, aimed at advancing the large-scale tax and spending bill dubbed "Big and Beautiful" by President Donald Trump. Following the passage of this procedural vote, the likelihood of the bill passing within the coming days has increased. It is understood that after this procedural motion is passed, the massive tax and spending bill will undergo recitation, debate, amendment votes, and a final vote, a process expected to take several days. This leaves less than one week before the July 4th deadline set by Trump. Not only did all Democrats vote against the motion, but they also employed delaying tactics. On June 28th, Senate Minority Leader Chuck Schumer stated that Democrats would force the Senate to recite the full 940-page bill. The Hill reported that reciting the bill would take 12 hours.

The United States has reached an agreement with G7 members to establish a "parallel" system to avoid a global tax war

The United States and other G7 members signed an agreement aimed at avoiding a global tax war, proposing the establishment of a "parallel" system to exempt U.S. companies from certain provisions of the existing global agreement. As part of the agreement, U.S. officials agreed to remove provisions from the Trump tax cuts that would increase taxes on income earned by non-U.S. companies and individuals in the United States. This provision, known as Article 899, is referred to as a "retaliatory tax" because it only raises the tax rates on countries that the U.S. government deems to have discriminatory tax policies. The G7 stated on Saturday that this parallel system could "provide greater stability and certainty for the future of the international tax system."

Yemen's Houthis vow to continue attacks against Israel

Yahya Saree, spokesperson for Yemen's Houthi group, declared in a statement on June 28 that the Houthis had launched a "Zolfaghar" ballistic missile at a target in Beersheba, southern Israel, successfully achieving its objective. Additionally, over the past week, the Houthis had repeatedly fired ballistic missiles and drones targeting Israeli locations in Beersheba, Jaffa, and Haifa. Saree emphasized that the group would not abandon its support for the Palestinian people and would continue operations until Israel halts its aggression against the Gaza Strip and lifts the siege. Earlier that day, the Israel Defense Forces (IDF) reported monitoring a missile originating from Yemen, triggering alerts across multiple Israeli regions. The IDF stated the missile was "most likely successfully intercepted".

Japanese poll shows Prime Minister Shigeru Ishiba's cabinet support below 30% for fourth consecutive month

A recent poll in Japan revealed that public support for Prime Minister Shigeru Ishiba's cabinet stands at 24%, remaining below 30% for the fourth consecutive month. In Japanese politics, a cabinet approval rating below 30% is viewed by public opinion as entering the "danger zone," while a drop below 20% is considered the "resignation zone." According to Japanese media analysis, if the current governing coalition fails to secure a majority in the July 20th House of Councillors election, Ishiba may lose his position as Prime Minister.

Trump hopes Powell resigns, vows not to appoint Fed Chair who won't cut rates

Last Friday, U.S. President Donald Trump stated he would not appoint anyone as Federal Reserve Chair unless they commit to lowering interest rates beyond current levels. This marks his clearest condition yet for potential candidates to succeed Jerome Powell, making interest rate cuts a non-negotiable requirement for the position.

Trump renewed his attacks on Powell during remarks at the White House, declaring, "I would love it if he resigned, if he wanted to. His performance has been really shoddy." Trump also labeled Powell "a stupid person." With Powell's term expiring in May 2026, Trump has increasingly shifted focus toward potential successors.

In recent weeks, Trump revealed he has three or four candidates in mind and will announce his decision soon. Historically, most Fed chair appointments occur about three to four months before a vacancy. With approximately 10 months remaining in Powell's term, Trump's early nomination push is widely seen as an attempt to undermine Powell's authority, effectively creating a "shadow Fed chair" advocating for divergent policies.

However, Treasury Secretary Bessent, who is considered a potential successor, downplayed the notion of a "shadow chair." Bessent indicated Trump's nomination of the new chair may come in October or November. When asked about reports naming him as a candidate, Bessent said he has "the best job" in Washington and is "happy to do what President Trump wants me to do". Other rumored candidates include National Economic Council Director Hassett, former Fed Governor Warsh, and current Governor Waller.

U.S. firms to gain exemptions from parts of Global Minimum Tax under G7 Deal

According to a Saturday report by the Financial Times, the G7 stated in a declaration that the U.S. and its G7 partners have agreed to support a proposal exempting American companies from certain provisions of the 2021 "global minimum tax". Canada, the current G7 chair, announced in the declaration that a "parallel system" has been established in response to the U.S. government's agreement to repeal Section 899—the retaliatory tax provision—from President Donald Trump's tax and spending bill. U.S. Treasury Secretary Bessent announced the agreement with the G7 on June 26th, noting that the G7's acceptance of partial tax exemptions for U.S. firms comes in exchange for removing Section 899, colloquially known as the "retaliatory tax," from the U.S. "Big and Beautiful" Bill.

Yemen's Houthis vow unabated attacks on Israel

OPEC+ poised for another major output hike in August

OPEC+ will consider extending its significant production increases at next month’s meeting, with Saudi Arabia leading efforts to reclaim market share, according to reports. Eight major OPEC+ members have collectively raised output by 411,000 barrels per day (b/d) monthly over the past three months. Several representatives confirmed these nations are prepared to approve another production hike for August during the July 6th meeting. Despite sluggish demand and ample supply, Saudi Arabia directed OPEC+ to accelerate its planned output restoration, an unexpected reversal that briefly drove oil prices to four-year lows in April.

April GDP report signals imminent Bank of Canada rate cut

TD Securities stated that Canada's April GDP report showing a 0.1% month-over-month decline signals the Bank of Canada (BoC) is poised to cut interest rates again. This view aligns with the central bank's latest meeting minutes, which indicate BoC officials require economic growth to hover near zero before considering further cuts. April's GDP data crossed this threshold, suggesting another contraction likely occurred in May. A second prerequisite—cooling inflation—is also materializing: this week's core CPI edged down slightly, and the BoC will seek further evidence of moderation when June inflation data arrives in July.

Core PCE inflation edges higher while consumer spending unexpectedly contracts

U.S. data released Friday showed the Personal Consumption Expenditures (PCE) price index rose 2.3% year-over-year and 0.1% month-over-month in May. The core PCE index increased 2.68% from a year earlier and 0.2% from the prior month.

Meanwhile, inflation-adjusted consumer spending fell 0.3%—the largest decline since the beginning of this year—indicating growing uncertainty from the Trump administration's economic policies is increasingly weighing on growth prospects. Personal income in May recorded its steepest drop since 2021, mainly due to reduced government transfer payments. However, wages rose 0.4% for the second consecutive month, extending recent solid gains. This suggests consumers retain their capacity to keep spending, though the savings rate plunged to 4.5%.

Following the PCE release, market expectations for Fed rate cuts saw minimal shifts. According to the CME FedWatch Tool: The probability of holding rates steady in July is 77.3% (previously 79.3%). The probability of a 25-basis-point cut in July is 22.7% (previously 20.7%). The probability of holding rates steady in September is 8.1% (previously 8.2%). The probability of a cumulative 25-bp cut by September is 71.6% (previously 73.3%). The probability of a cumulative 50-bp cut by September is 20.4% (previously 18.5%).