Tariffs for Peace? Trump's Secondary Tariff Threat Shakes Global Trade but Markets Stay Resilient

China–U.S. Trade War

Economic

Summary:

President Trump’s threat of 100% secondary tariffs on buyers of Russian exports is reframing tariffs as a geopolitical tool rather than just an economic weapon....

A New Chapter in Tariff Policy: Geopolitics Over Trade Deficits

In a striking shift from traditional trade war rhetoric, U.S. President Donald Trump has announced that he will impose “secondary tariffs” set at 100% on countries and companies purchasing Russian exports if Moscow fails to end its war in Ukraine within 50 days. This policy marks a significant deviation from Trump’s previous tariff strategy, which focused on penalizing nations directly over trade imbalances. Instead, the new tactic applies economic pressure not only on Russia but also on its economic enablers.

According to the International Trade Centre, Russia’s top exports especially crude oil are heavily bought by China, India, and Turkey. If these countries do not pivot their sourcing strategies, they could face tariffs that would effectively double the cost of doing business with the United States. The geopolitical ramifications are substantial, potentially destabilizing major trade corridors while testing global diplomatic alliances.

Yet, despite the threat of economic disruption, markets responded with surprising calm. On Monday, all major U.S. stock indexes posted modest gains, suggesting investors either doubt the immediacy of implementation or believe U.S. firms will remain insulated from the fallout.

Domestic Support: Patriotism as a Price Stabilizer?

While critics warn of the inflationary effects of tariffs, the White House offers a different narrative. Kevin Hassett, Director of the National Economic Council, suggests that “patriotic” buying Americans favoring domestic goods over imports is muting inflation. This consumer shift, whether by design or economic necessity, may be helping to stabilize prices despite elevated duties on imports.

But economists remain skeptical. Chris Hodge of Natixis CIB Americas highlights that inflationary pressure might simply be delayed, not absent. “Last month’s readings on apparel and autos were unexpectedly low, which runs counter to what you’d expect given the recent tariff escalation,” Hodge noted. The June inflation report due Tuesday is expected to clarify whether underlying prices are indeed reacting to these policy changes or if the worst is yet to come.

Corporate Reactions and Industry Sensitivities

Trump’s broadening use of tariffs coincides with uncertainty in sectors like retail and automotive, where import exposure is high. Walmart, for instance, continues to warn about rising prices linked to tariff volatility, even as it posts strong domestic sales. Meanwhile, auto manufacturers face a dual risk: higher input costs from global supply chains and reduced competitiveness in export markets.

The fashion and auto sectors, historically among the most tariff-sensitive, have yet to show sustained inflation in consumer prices raising questions about whether firms are absorbing the costs or delaying price hikes to preserve demand.

Technology and Trade: Tesla, xAI, and the Musk Factor

In a separate development, Elon Musk rejected the idea of a full merger between Tesla and his artificial intelligence startup xAI. However, he indicated Tesla may invest in xAI, pending a shareholder vote. This comes as analysts see broader tech opportunities for Tesla’s battery supplier, CATL, suggesting potential growth beyond hardware into AI and software ecosystems a move that may help insulate tech players from future tariff volatility.

Trump’s use of secondary tariffs as a geopolitical lever marks a fundamental shift in U.S. trade policy, blending foreign policy aims with economic sanctions. While markets appear unfazed for now the risk of retaliation from China, India, and Turkey looms large. If these tariffs are enforced, the ripple effects across supply chains, commodity prices, and inflation could be significant.

The upcoming U.S. inflation report will be closely watched not only for signs of consumer price pressures but also as a litmus test for the White House’s claim that patriotism at the cash register is taming inflation. With 50 days on the clock, the global economy may be entering a countdown not just to peace talks, but to another potential trade realignment.

Source: CNBC

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Liam Peterson

China’s home prices fell at a faster pace in June, underscoring growing speculation for additional measures to revive the property market.

New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.27% from May, the most in eight months, National Bureau of Statistics figures showed Tuesday. Values of second-hand homes fell 0.61%, the biggest decline since September.

China’s prolonged housing downturn is stifling efforts to boost consumer demand and shore up the economy as exports remain under pressure from trade tensions with the US. Calls for further policy support for the residential market have grown as the effects of a stimulus blitz last September wear off.

Preliminary figures for June show “a clear trend of market weakening,” UOB Kay Hian analysts Jieqi Liu and Damon Shen wrote in a report last week. “We see a higher likelihood of policy support being announced during the July Politburo meeting.”

Investors are closely watching for further signs of policy support. A Bloomberg Intelligence gauge of Chinese developer stocks jumped late last week on speculation that more stimulus is in the works.

Premier Li Qiang pledged to end the real estate decline at a State Council meeting last month. When China’s top leaders voiced such a policy target last September, a stimulus package ensued.

Still, some economists expect Beijing to hold off on major support measures for now, to preserve policy flexibility in case tensions with Washington resurface after a temporary deal expires in mid-August.

Source: Bloomberg Europe

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Gerik

Economic

Rate Hold Decision Halts Momentum in Consumer Sentiment

Consumer confidence in Australia saw a modest gain in July, rising just 0.6% according to the Westpac-Melbourne Institute survey, following a similar 0.5% increase in June. While the index now stands at 93.1 at 12.6% higher than a year earlier it remains firmly below the neutral level of 100, indicating that more consumers still feel pessimistic than optimistic about economic conditions.

The key driver tempering sentiment was the Reserve Bank of Australia's unexpected decision to keep the cash rate unchanged at 3.85%. Market participants had anticipated a further easing following rate cuts in February and May, which had briefly fueled optimism about an improving macroeconomic outlook.

Matthew Hassan, Westpac's head of macro forecasting, noted a clear divergence in sentiment depending on the survey timing. Participants polled before the RBA’s announcement reported a sentiment index of 95.6, while those surveyed after the decision fell to 92. This suggests the rate hold significantly cooled consumer expectations that had been trending higher in anticipation of continued monetary support.

Diverging Views on Short-Term and Long-Term Economic Prospects

Despite the modest monthly gain, deeper signals in the survey reflect lingering household concerns. The one-year economic outlook index increased slightly by 1.8%, suggesting tentative short-term confidence. However, the five-year economic outlook declined by 2.8%, pointing to enduring anxieties over structural risks, global uncertainty, and cost-of-living pressures.

Family finances showed some resilience, with respondents reporting a 5% improvement compared to a year ago. Looking ahead, expectations for financial conditions over the next 12 months rose 2.6%, potentially influenced by earlier rate cuts and stabilizing inflation. Still, these gains remain insufficient to fully reverse the deeply entrenched caution seen over the past year.

Weak Spending Intentions Signal Challenge for Retail Recovery

In a worrisome sign for the retail sector, the index measuring whether it is a good time to buy major household items dropped 2.6%. This is particularly important because discretionary spending often acts as a leading indicator for broader economic recovery. Consumer hesitation around big-ticket purchases may reflect not only interest rate uncertainty but also concerns over job security, household debt, and soft wage growth.

Complementing Westpac’s findings, ANZ’s weekly consumer sentiment index also declined falling 2.1 points to 86.5 with pessimism largely driven by fears about Australia’s economic trajectory in the second half of 2025. Together, these results highlight the fragility of household confidence amid mixed signals from policymakers and global headwinds.

While Australia's consumer sentiment is no longer in the deeply depressed levels of late 2023, recovery remains tentative and fragile. The RBA’s unexpected rate pause has disrupted improving expectations and underscored the delicate balancing act facing policymakers. Unless inflation continues to decline and the central bank resumes monetary easing, consumer caution may persist dampening spending, slowing the retail rebound, and placing pressure on economic growth in the second half of the year.

Source: Reuters

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Gerik

Economic

Dollar Gains Ground on Fed Speculation and CPI Anticipation

The dollar index hovered near a three-week high at 98.104 in Tuesday’s Asian session, reflecting investor caution ahead of key U.S. inflation data due later in the day. Market participants anticipate that the June CPI report could influence the Federal Reserve’s next steps, especially under growing political pressure from the Trump administration to cut interest rates drastically to 1%. The dollar was steady against the yen at 147.75, just shy of a three-week peak of 147.78 hit Monday. Meanwhile, the euro traded at $1.1662, having briefly dipped to its lowest level since June 25.

Despite Fed Chair Jerome Powell’s expectation that tariff-related inflation will rise this summer, Fed funds futures show traders pricing in 50 basis points of cuts by the end of 2025, with September as the likely starting point. According to a Reuters poll, headline inflation is forecast to rise from 2.4% to 2.7%, and core inflation is expected to climb to 3.0% from 2.8%.

A stronger-than-expected CPI could justify the Fed's current rate hold at 4.25%-4.50%. However, if inflation shows no signs of acceleration, pressure from the White House already intensifying may mount, particularly if Trump pushes harder for Powell’s ouster in pursuit of ultra-loose monetary policy.

Bitcoin Holds High Ground on Regulatory Hopes

Bitcoin hovered at $120,067 after setting a fresh all-time high of $123,153.22 on Monday. This surge followed rising optimism around the U.S. House of Representatives beginning debate on a suite of bills that could give the crypto sector long-awaited regulatory clarity. Investors are interpreting the legislative activity as a potential legitimizing force for digital assets, especially as Trump brands himself the "crypto president" and advocates for pro-industry rules.

Bitcoin's recent strength, up 29% year-to-date, has also sparked renewed momentum across the altcoin space, while Ether traded near a five-month high. However, the cryptocurrency market remains sensitive to policy announcements, especially given geopolitical instability and the broader risk-off sentiment driven by trade war dynamics.

China Growth Risks Add Pressure on Aussie Dollar

The Australian dollar edged lower to $0.6542, weighed down by caution ahead of China’s Q2 GDP data. Analysts expect growth to slow to 5.1% from 5.4% in Q1, as persistent trade frictions and a struggling property market weigh on consumer demand. Should the data come in weaker than expected, it could reinforce downward pressure on the Aussie and increase calls for fresh stimulus from Beijing.

The Chinese economic outlook is closely tied to Australian exports, particularly in commodities, meaning any disappointment in China’s performance could directly impact AUD positioning in global forex markets.

Market sentiment remains poised between upcoming CPI data and political developments. The dollar’s strength, supported by Treasury yields and inflation expectations, may be tested if U.S. price data falls short. Meanwhile, Bitcoin continues to ride a wave of optimism tied to legislative progress. Across the Pacific, China's economic performance remains a critical watchpoint for risk sentiment and commodity currencies like the Aussie. As global markets digest the dual pressures of trade politics and monetary policy speculation, volatility may increase ahead of major economic releases this week.

Source: Reuters

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Grace Montgomery

Gold steadied following a modest drop on Monday after President Donald Trump said he was open to more tariff negotiations with major economies including the European Union.

Bullion was near $3,347 an ounce after dropping 0.4% in the previous session. Trump’s apparent willingness to extend trade talks eased haven demand, although it appeared at odds with his insistence that letters to governments setting tariff rates are “the deals” for trade partners.

The precious metal has surged by more than a quarter this year, hitting a record above $3,500 an ounce in April, as the US’s aggressive and erratic trade policy enhanced its appeal as a store of value in uncertain times. However, the rally has stalled over the last three months as investors wait for more clarity on the eventual contours of the new trade system, and on signs they’re hesitant to buy gold at such elevated levels.

“If trade talks deteriorate before August, we could easily see bullion retest or even breach its former highs,” said Fawad Razaqzada, a market analyst at City Index. “For now, the market seems firmly in wait-and-see mode, keeping the gold forecast leaning cautiously bullish.”

Gold rose 0.1% to $3,347.11 an ounce as of 8:26 a.m. in Singapore. The Bloomberg Dollar Spot Index dipped 0.1% after rising 0.3% on Monday. Silver edged higher, after hitting a 14-year-high in the previous session before closing lower. Palladium climbed, while platinum was flat.

Source: Bloomberg Europe

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Gerik

Economic

United States Remains Cornerstone Of Asian Automakers’ Strategies

For Toyota, Hyundai, Kia and their regional peers, North America continues to generate an outsized share of revenue and operating profit. Company filings show the region contributes roughly sixty percent of Hyundai-Kia’s earnings and more than forty percent of Toyota’s consolidated revenues. Even as President Donald Trump’s thirty-percent tariff threat rattles boardrooms, executives concede that walking away from the world’s most lucrative auto arena is not an option. Managers interviewed in Tokyo and Seoul confirmed privately that no retrenchment plans are on the table; instead, they expect to balance defensive cost measures with product-driven offensives.

The American consumer has pivoted sharply toward fuel-efficient hybrids as concerns over battery range, charging infrastructure and sticker prices continue to weigh on fully electric vehicles. That trend plays directly into the strengths of Toyota, which commands roughly two-thirds of the U.S. hybrid segment, and Hyundai-Kia, which has ramped up sales of its Ioniq, Tucson and Sportage hybrid variants. Analysts at Morningstar and Hanwha Investment agree that a rich hybrid portfolio affords higher pricing power and customer loyalty, creating room to absorb tariff-induced margin pressure without immediate price hikes. Weaker rivals reliant on low-margin fleet sales most notably Nissan are expected to cede share in this environment.

Tariffs Accelerate Localisation And Potential Industry Consolidation

While Toyota already builds more than half the vehicles it sells in America, Hyundai and Kia still import roughly two-thirds of U.S. volume. Trump’s tariff salvo is likely to accelerate their plans to expand Alabama and Georgia assembly lines and integrate a newly announced $21 billion U.S. investment programme that includes a captive steel mill and battery supply network. Research firm Euromonitor argues that the policy shock could speed consolidation: Mazda and Subaru, both partially owned by Toyota, may lean more heavily on their larger partner for joint production and purchasing. Investors are also revisiting the prospect of a rekindled Nissan-Honda tie-up after earlier merger talks collapsed.

Once viewed as the ultimate frontier, the Chinese market has tilted decisively toward domestic electric vehicle champions such as BYD and SAIC. Japanese and Korean brands, which built global footprints on internal-combustion and hybrid know-how, now face shrinking share and declining profitability in mainland China. By contrast, the United States offers higher transaction prices, stronger brand equity and ironically tariff protection that keeps disruptive Chinese EV imports at bay. Even with a hefty duty on finished vehicles, analysts call the United States the most rational place for Asian incumbents to defend and grow volume.

Short-Term Pain, Long-Term Opportunity

In the near term, tariffs will compress earnings: every ten-percent duty could shave up to 1.5 percentage points from Hyundai-Kia’s operating margin and about one percentage point from Toyota’s, according to Pelham Smithers Associates. Yet stronger players appear willing to sacrifice margin to preserve showroom traffic, betting they can outlast competitors in a “game of chicken.” They also see an opportunity to gain share from cost-sensitive brands that cannot absorb duties without raising retail prices.

Many Asian automakers have yet to release full-year guidance that incorporates Trump’s latest tariff levels. Equity analysts warn of potential downward revisions when second-quarter results arrive next month. While some investors argue punitive duties are already priced into sector valuations, others point to limited disclosure on hedging strategies and the cost trajectory of localisation projects. Surprises, therefore, remain possible.

Tariffs have unquestionably raised the cost of doing business for Asia’s legacy carmakers, but they have not diminished the strategic primacy of the U.S. market. With competitive hybrid technology, ongoing investment in American production and the buffer of Chinese EV import duties, Toyota, Hyundai-Kia and their peers appear prepared to navigate the turbulence. Whether they emerge stronger depends on execution: maintaining product appeal, scaling local supply chains and leveraging any shake-out to capture share from less resilient rivals.

Source: Reuters

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Alice Winters

President Donald Trump secured approval of his first judicial nominee of his second term, as the U.S. Senate confirmed a former law clerk to three members of the U.S. Supreme Court's conservative majority to a seat on a federal appeals court.

The Republican-led Senate voted 46-42 along party lines in favor of Whitney Hermandorfer, a lawyer serving under Tennessee's attorney general, to be appointed as a life-tenured judge on the Cincinnati-based 6th U.S. Circuit Court of Appeals.

She is the first of 15 judicial nominees the president has announced to date to secure Senate approval, as Trump and his Republican allies in the Senate look to add to the 234 judicial appointments Trump made in his first term.

With Hermandorfer's confirmation, Trump tied former President Joe Biden's total of 235 judicial appointments.

Such appointments could help Trump further shift the ideological balance of the judiciary to the right at a moment when White House officials have accused judges who have blocked parts of his immigration and cost-cutting agenda they have found to be unlawful of being part of a "judicial coup."

Republican Senate Majority Leader John Thune, ahead of a procedural vote on Hermandorfer's nomination on Thursday, said the goal was to fill around 50 judicial vacancies on the bench with judges who "understand the proper role of a judge."

He said judges should "understand that their job is to interpret the law, not usurp the job of the people's elected representatives by legislating from the bench."

In a statement after the vote, Republican Senate Judiciary Committee Chairman Chuck Grassley praised Hermandorfer's qualifications and said Republicans will push forward with nominations despite "obstruction" by Democrats.

Democratic Senate Minority Leader Chuck Schumer said on the Senate floor Monday that Trump is only interested in appointing "foot soldiers in black robes" to the courts.

Hermandorfer clerked for Supreme Court justices Samuel Alito and Amy Coney Barrett, and clerked for Justice Brett Kavanaugh while he was a judge on a federal appeals court in Washington, D.C. Barrett and Kavanaugh were appointed to the Supreme Court in Trump's first term, giving it a 6-3 conservative majority.

Hermandorfer has been leading a strategic litigation unit in Republican Tennessee Attorney General Jonathan Skrmetti's office, where she defended the state's near-total abortion ban and challenged a rule adopted under Biden barring discrimination against transgender students.

Senate Democrats had argued that Hermandorfer, 38, who is just a decade out of law school, lacked sufficient legal experience to join the bench and had shown a willingness to support extreme legal positions supporting Trump's agenda.