Thailand Weighs Zero Tariff Offer on U.S. Goods as Tariff Deadline Approaches

Economic

Summary:

Thailand is considering eliminating tariffs on additional U.S. imports and preparing $6.1 billion in soft loans to cushion its economy, as it seeks to avert a looming 36% U.S. tariff set to take effect August 1....

Strategic Trade Concessions Aimed at Averting Heavy U.S. Tariff

Thailand’s Finance Minister and Deputy Prime Minister Pichai Chunhavajira announced on Monday that the government is evaluating a potential offer of zero tariffs on more American imports. This policy shift is part of a broader effort to ease escalating trade tensions with Washington, which has threatened to impose a 36% tariff on Thai exports if negotiations fail before the August 1 deadline.

Speaking at a business seminar in Bangkok, Minister Pichai also revealed that Thailand is preparing 200 billion baht approximately $6.1 billion in soft loans to support domestic firms and exporters who may be affected by the new U.S. tariff regime. These funds would likely be directed toward export-dependent sectors, including electronics, automotive components, and agricultural processing.

Economic Cushioning and Diplomatic Calculations

Thailand's twin-track approach pursuing both tariff concessions and domestic economic cushioning illustrates the urgency with which Bangkok is addressing the potential fallout. While the proposed tariff relief for U.S. goods may appear to tilt the trade balance in America’s favor, Thai officials may view it as a necessary move to preserve broader market access for key industries.

With the Thai economy still recovering from pandemic-related disruptions and external demand playing a central role in GDP growth, the risk of losing U.S. market share under a 36% tariff scenario is significant. The government’s soft loan package suggests an acknowledgment that even if a deal is reached, uncertainty alone could strain supply chains and financing conditions.

Avoiding Escalation Through Strategic Flexibility

As Thailand negotiates under pressure, its consideration of unilateral tariff reductions highlights a broader regional strategy of accommodating U.S. trade demands to avoid deeper economic retaliation. This mirrors the behavior of other emerging markets also targeted in President Trump’s recent tariff wave, many of which are scrambling to secure exemptions or bilateral adjustments.

The success of Thailand’s approach will depend not only on U.S. receptiveness to its offers, but also on whether such moves are sufficient to avert broader protectionist measures. With less than three weeks to go before the proposed tariffs are enacted, Thailand’s economic diplomacy is entering a critical phase. The coming days will determine whether Bangkok’s concessions lead to a reprieve or signal the beginning of more aggressive trade realignments in Southeast Asia.

Source: Reuters

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[Quick Facts]

1. Trump proposes 200% tariffs, sending Japan's pharma industry into panic.

2. Iran warns three European Nations: Sanctions snapback could 'End' Europe's role in nuclear issue.

3. U.S. issues "Tariff Ultimatums" to EU and Mexico, allies fight back hard.

4. Timiraos: Fed independence under renewed threat, no rate cut expected this month.

5. Ukrainian lawmaker: U.S. partially resumes aid to Ukraine, but total amount slashed by 90%.

6. Trump's proposed 50% tariff on copper to include refined copper, sources say.

7. Gaza Ceasefire Talks enter critical stage after a week; Hamas warns, Israeli PM takes hardline stance.

[News Details]

Trump proposes 200% tariffs, sending Japan's pharma industry into panic

U.S. President Donald Trump has announced plans to impose tariffs as high as 200% on imported pharmaceuticals and raw materials, the highest rate among all known U.S. tariff categories. This has triggered significant alarm in Japan's pharmaceutical sector. Data shows that Japan's pharmaceutical exports to the U.S. exceeded 400 billion yen (approximately 19.65 billion Chinese Yuan) last year, accounting for 35.5% of its total pharmaceutical exports, making the U.S. Japan's largest export market for pharmaceuticals. In April, the Japan Pharmaceutical Manufacturers Association established a dedicated task force to assess the potential impact of U.S. tariff policies on the industry. The association fears that if the new tariffs take effect, Japanese pharmaceutical companies could face steep profit declines, forcing them to slash R&D budgets. This, in turn, could delay new drug development projects and have long-term repercussions across the supply chain.

Iran warns three European Nations: Sanctions snapback could 'End' Europe's role in nuclear issue

On July 12th, the European Press reported that Iranian Foreign Minister Abbas Araghchi issued a warning to the three European powers (Germany, France, and the UK) involved in the currently suspended Iran nuclear talks: if these countries reinstate sanctions on Iran, they will automatically be excluded from any future dialogue on the issue. He stated that a so-called snapback of UN sanctions could end Europe's role in the issue of Tehran's nuclear program.

U.S. issues "Tariff Ultimatums" to EU and Mexico, allies fight back hard

On July 12th, U.S. President Donald Trump sent two tariff threat letters, announcing 30% tariffs on imports from the EU and Mexico starting August 1st. The EU, the U.S.'s largest trading partner, immediately vowed to retaliate if necessary. With this move, Trump has now imposed tariff conditions on 24 countries and all 27 EU member states. Analysts warn that the trade turmoil sparked by these measures will ultimately be paid for by U.S. consumers.

Timiraos: Fed independence under renewed threat, no rate cut expected this month

Nick Timiraos wrote in a recent article that the dispute over building renovations has emboldened a faction within the Trump administration that has long sought to challenge the Federal Reserve's independence. Treasury Secretary Bessent and other economic advisors generally advocate preserving the Fed's autonomy. For instance, Bessent recently declined to criticize Trump over the renovation issue in a Fox Business interview. However, other advisors and external allies have been exploring legal avenues to remove Powell since before the election.

In testimony last month, Powell stated, "No one wants to do a major renovation of a historic building during their term in office. Much prefer to leave that to your successors, and this is a great example why – let alone two historic buildings." Previously, Trump had pushed for broader interest rate cuts to reduce government borrowing costs. The Fed is not expected to cut rates at its upcoming meeting later this month, but Powell has hinted at potential cuts later this year if inflation remains stable or the labor market weakens. Trump aims to lower the federal deficit's debt servicing costs, though his tax cuts may widen the deficit. Outside extreme circumstances like war, central banks in developed economies resist such pressures, believing stable inflation is crucial to maintaining confidence in their currencies.

Ukrainian lawmaker: U.S. partially resumes aid to Ukraine, but total amount slashed by 90%

Ukrainian lawmaker Oleksandr Dubinsky (currently detained in a pre-trial detention center on treason charges) revealed in an interview that the U.S. has allocated only 300 million (less than 10% of the agreed 3.8 billion). In a Telegram post, Dubinsky stated: "Look at how the 'victory' of US military aid works. First, cutting off aid forced Zelensky to accept America's views on further negotiations with Russia. After receiving the relevant signals, $300 million in aid was unfrozen, while the total amount of military aid previously agreed upon was $3.8 billion." The lawmaker noted that the restored aid amounts to less than 10% of the potential total, effectively a 90% reduction.

Trump's proposed 50% tariff on copper to include refined copper, sources say

U.S. President Donald Trump’s plan to impose a 50% tariff on copper imports will cover all refined copper, signaling broad measures to boost U.S. production of the widely used material. Trump announced the tariffs would take effect on August 1st but provided few details. However, sources familiar with the matter, who requested anonymity due to private discussions, confirmed refined copper will be included.

Gaza Ceasefire Talks enter critical stage after a week; Hamas warns, Israeli PM takes hardline stance

As of July 13, the latest round of Gaza ceasefire talks in Doha, Qatar, has entered its seventh day. Amid ongoing Israeli military operations and heavy civilian casualties in Gaza, conflicting statements emerged from the warring parties and the U.S. Hamas described negotiations as reaching a "critical stage," while Israel's prime minister vowed not to abandon any objectives. The U.S. Middle East envoy expressed optimism, but whether the talks will end the current conflict remains uncertain.

[Today's Focus]

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Economic

Stocks

Futures Slip as Trade Concerns Collide with Earnings Season

US equity futures opened the week under pressure, as a combination of geopolitical friction and corporate earnings uncertainty unsettled investor sentiment. Dow futures dropped by roughly 0.4%, with the S&P 500 and Nasdaq 100 futures following suit, each slipping around 0.4%. The modest decline reflects growing investor nervousness ahead of a packed economic and earnings calendar.

The immediate catalyst for this retreat was President Donald Trump’s weekend declaration that the US will impose 30% tariffs on imports from the European Union and Mexico beginning August 1. These measures arrive on top of existing inflationary concerns and threaten to disrupt transatlantic and North American trade flows. Officials from both the EU and Mexico have expressed willingness to continue negotiations, but markets are now pricing in the risk that these tariffs will materialize in full.

Market Weakness Follows Break in Winning Streak

Sunday’s futures downturn comes on the heels of a losing week for Wall Street, with all three major indexes the S&P 500, Nasdaq, and Dow ending their three-week winning streaks. While the broader indexes remain close to all-time highs, momentum appears to be faltering as policy risk resurfaces and economic signals become increasingly mixed.

The timing of the tariff escalation also coincides with heightened anticipation around June’s Consumer Price Index (CPI) data. Investors will be scrutinizing inflation figures for clues on how past rounds of tariffs are flowing through to consumer prices. Elevated readings may complicate the Federal Reserve’s path toward potential rate cuts, with the next policy decision expected in just over two weeks.

Political Interference Clouds Monetary Outlook

Markets are also contending with the renewed tension between the White House and the Federal Reserve. National Economic Council Director Kevin Hassett stated over the weekend that President Trump could remove Fed Chair Jerome Powell “if there’s cause,” intensifying speculation about the independence of the central bank. Such public pressure on the Fed adds another layer of uncertainty for investors attempting to forecast interest rate policy amid already fragile market conditions.

Amid this volatile backdrop, the second-quarter earnings season begins in earnest. Major US banks are first in line to report, including Wells Fargo, which recently emerged from a decade of strict regulatory oversight. Investors are also closely watching M&A activity and IPO performance, which could offer insight into broader capital market health.

Key tech and consumer giants will also be in focus. Netflix will kick off earnings for US tech firms, while Taiwan Semiconductor and ASML are expected to provide updates on the AI-driven semiconductor boom. PepsiCo, United Airlines, and American Express are among the other high-profile names reporting this week, with analysts looking for signs of resilience in consumer spending and corporate margins.

The convergence of escalating trade barriers, inflation concerns, central bank uncertainty, and critical earnings reports presents a complex challenge for markets this week. Investors appear cautious but not panicked, with futures falling modestly in response to the evolving risk landscape. The degree to which Trump’s tariffs are enforced, the clarity provided by CPI data, and the strength of corporate earnings will collectively shape whether markets regain upward momentum or shift into a more defensive posture in the weeks ahead.

Source: Yahoo Finance

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Liam Peterson

Japan's central bank may face political pressure to keep interest rates low for longer than it wants, as opposition parties favouring tax cuts and loose monetary policy are expected to gain influence after a July 20 election.

Opinion surveys suggest Prime Minister Shigeru Ishiba's coalition may lose its majority in the upper house of parliament, forcing it to court an array of smaller parties pushing for easier fiscal and monetary policy.

The governing bloc led by Ishiba's Liberal Democratic Party is already a minority in the more powerful lower house, so a stalemate in both chambers could give opposition parties outsized influence in policy decisions.

Ishiba has supported the Bank of Japan's policy of gradually lifting interest rates from near zero as inflation picks up in the world's fourth-biggest economy, while trying to curb the biggest government debt burden in the industrial world.

But if opposition groups gain traction with their pressure on the BOJ to avoid rate hikes and for the government to cut the sales tax, that could boost bond yields and complicate the bank's efforts to normalise monetary policy, some analysts say.

The BOJ declined to comment on the potential impact of the election on monetary policy.

"There's a 50% chance the ruling coalition could lose its majority in the upper house, which could lead to increased debate about cutting Japan's consumption tax rate," said Daiju Aoki, chief Japan economist at UBS SuMi Trust Wealth Management.

"That would push up Japan's long-term interest rates by stoking concern over the country's finances," he said.

DEBT SET TO RISE

Sohei Kamiya, head of the upstart right-wing party Sanseito, has criticised the BOJ for slowing its bond buying when the economy remains weak.

"The Ministry of Finance and BOJ should work hand in hand in taking aggressive steps for a few years to boost domestic demand," Kamiya told a press conference this month.

Another small group, the Japan Innovation Party, wants the BOJ to go slow in raising rates to restrain the cost of interest on the government's debt.

Yuichiro Tamaki, head of the Democratic Party for the People, a party seen as a strong candidate to join Ishiba's coalition, has urged the BOJ to loosen, not tighten, monetary policy to keep the yen from rising and hurting the export-reliant economy.

Even if the coalition keeps its majority, Ishiba may need to ditch his hawkish fiscal tilt and boost spending to cushion the economic blow from threatened U.S. tariffs and rising costs of living.

"There's a good chance the government will compile an extra budget to fund another spending package to the tune of 5 to 10 trillion yen ($35 billion-$70 billion). That would push up bond yields further," said former BOJ board member Makoto Sakurai, who expects the central bank to avoid raising rates at least until March.

Japan's public debt is equal to 250% of gross domestic product, far above that of Greece at 165%. The government spends nearly a quarter of its budget to finance a 1,164-trillion-yen ($7.9-trillion) debt pile, with the cost expected to rise steadily as the BOJ exits zero-interest rates.

'NEED TO BRACE'

To be sure, inflation - above the BOJ's 2% target for three years - boosts nominal tax revenues, which can help the government avoid ramping up bond issuance to fund further spending.

But cutting the sales tax rate, an idea Ishiba has ruled out for now, would leave a bigger hole in Japan's finances. Once a fringe idea, cutting the 10% sales tax is now among Japan's most popular economic policy proposals.

In a recent poll by the Asahi newspaper 68% of voters thought a sales tax cut was the best way to cushion the blow from rising living costs, compared with 18% who preferred cash payouts.

If the sales tax is on the chopping block after the election, it is the kind of vital issue that could prod Ishiba to dissolve the lower house and call a snap election - a move that would prolong political uncertainty.

If Ishiba were to step down, an LDP race to replace him could revive market attention to candidates like Sanae Takaichi, an advocate of aggressive monetary easing whom Ishiba narrowly beat in the party's leadership race last year.

Unlike Ishiba, who gave a quiet nod to BOJ policy normalisation, Takaichi has said it would be "stupid" for the central bank to raise rates.

All this would mean the BOJ's rate hikes, already on pause due to uncertainty over U.S. tariffs, could be put on hold even longer.

"We may need to brace for a long period of political uncertainty and market volatility," said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities.

"That would just give the BOJ another reason to sit on the sidelines and wait for the dust to settle."

Source: Reuters

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Gerik

Economic

Active Management Gains Traction in a Fragmented Market

In a world of rising economic fragmentation and unpredictable market cycles, sovereign wealth funds are showing a clear shift in asset allocation strategy. According to the 2025 Invesco Global Sovereign Asset Management Study, large institutional investors particularly those overseeing more than $100 billion are increasingly turning to active management to better manage volatility and exploit selective opportunities. This move contrasts with the previous era of stability, during which passive strategies dominated due to their cost efficiency and market predictability.

Rod Ringrow, Invesco’s head of official institutions, underscored that the decline of “predictable” markets has forced funds to become more tactical. The move to active management is framed not as a temporary adjustment, but as a long-term recalibration in response to structural shifts, including inflation volatility, geopolitical risk, and policy uncertainty.

Wealth funds generated average returns of 9.4% in 2024, marking their joint second-best performance in the survey’s history. However, this outperformance does not appear to have diminished concerns about future challenges, including rising sovereign debt burdens and climate change risks over a 10-year horizon.

Dollar Still Dominates, But Long-Term Confidence Slips

Despite their evolving portfolio strategies, central banks remain cautious on currency diversification. While over 70% of the 58 central banks surveyed expressed concern about the long-term impact of growing US debt on the dollar, most remain skeptical that a credible alternative will emerge soon. Nearly 80% believe it would take more than two decades for another reserve currency to rival the greenback a notable increase from 58% just a year ago.

This cautious consensus suggests that while the dollar's long-term dominance is under scrutiny, the lack of viable alternatives, such as the euro or yuan, continues to anchor it as the global reserve standard. Only 11% of respondents viewed the euro as gaining momentum, compared to 20% last year, pointing to fading confidence in Europe’s ability to expand its influence in reserve portfolios.

Chinese Innovation Drives Strategic Investment Urgency

Perhaps the most striking finding from the survey is the growing enthusiasm among sovereign wealth funds for Chinese assets, particularly in innovation-led sectors. Nearly 60% of respondents intend to increase exposure to China over the next five years, with the number climbing to 73% among North American funds despite escalating tensions between the US and China.

This signals a reconfiguration of long-term portfolio strategies, where Chinese technology sectors such as artificial intelligence, semiconductors, cloud computing, electric vehicles, and green energy are now viewed with the same strategic urgency once reserved for Silicon Valley.

Ringrow attributed the trend to a sense of “FOMO” or fear of missing out, driven by China’s rapid technological progress and its positioning as a critical engine of future innovation. By contrast, only 13% of European funds expressed intentions to increase allocations to China, indicating regional disparities in risk appetite and geopolitical tolerance.

Private Credit and Digital Assets Emerge as New Frontiers

In the quest for income resilience and diversification, sovereign wealth funds are expanding into private credit. The proportion of funds allocating to this asset class has risen from 65% to 73% year-over-year, with half of them actively increasing their positions. The report highlights private credit as one of the most decisive and consistent trends in sovereign allocation strategies, driven by higher yields and lower correlation with public markets.

Simultaneously, digital assets are carving out a role in reserve management, particularly among emerging market wealth funds. While Bitcoin remains the most commonly considered asset, with 75% of respondents expressing interest, nearly half now also view stablecoins typically pegged to the US dollar as a viable investment vehicle. This marks a cautious but growing exploration of blockchain-based financial instruments within sovereign portfolios, particularly for liquidity and hedging use cases.

Strategic Realignment Amid Volatility

The 2025 Invesco report illustrates a significant strategic pivot among sovereign wealth funds and central banks toward active management, China-centric investment themes, and alternative asset classes. While the US dollar remains dominant, there is a widening recognition of its vulnerabilities. Meanwhile, the embrace of Chinese tech and private credit reflects a shift toward sectors and strategies deemed better suited to a more volatile and fragmented global landscape.

As uncertainty deepens around fiscal sustainability, inflation trajectories, and geopolitical realignments, these funds are reshaping their approach not to chase returns, but to fortify resilience. The next few years will determine whether these recalibrations serve as successful hedges against the seismic shifts currently defining the global financial order.

Source: Reuters

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Daniel Carter

Political

U.S. President Donald Trump said on Sunday he will send Patriot air defense missiles to Ukraine, saying they are necessary to defend the country because Russian President Vladimir Putin "talks nice but then he bombs everybody in the evening."

Trump did not give a number of Patriots he plans to send to Ukraine, but he said the United States would be reimbursed for their cost by the European Union.The U.S. president has grown increasingly disenchanted with Putin because the Russian leader has resisted Trump's attempts to negotiate a ceasefire between Ukraine and Russia.

Ukrainian President Volodymyr Zelenskiy has asked for more defensive capabilities to fend off a daily barrage of missile and drone attacks from Russia.

"We will send them Patriots, which they desperately need, because Putin really surprised a lot of people. He talks nice and then bombs everybody in the evening. But there's a little bit of a problem there. I don't like it," Trump told reporters at Joint Base Andrews outside of Washington.

"We basically are going to send them various pieces of very sophisticated military equipment. They are going to pay us 100% for that, and that's the way we want it," Trump said.

He plans to meet NATO Secretary General Mark Rutte to discuss Ukraine and other issues this week.

Source: Reuters

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Henry Thompson

New Zealand retail card spending fell in the second quarter, adding to signs that an initial spurt of economic growth early this year has all but disappeared.

Purchases on debit and credit cards at retail stores fell 0.7% from the first quarter, when it was unchanged, Statistics New Zealand said Monday in Wellington. The value of spending is lower than in the year-earlier quarter when the economy was entering a deep depression.

Sluggish consumer spending mirrors recent data showing the services and manufacturing industries remained in contraction in the month of June. The slowdown in domestic demand suggests gross domestic product barely expanded in the second quarter after 0.8% growth in the three months through March.

Sentiment is being challenged by a soft housing market, rising unemployment and a high cost of living. While home-loan interest rates are falling, many borrowers on fixed-terms are yet to get the full benefit until their mortgages roll over later this year, and are watching their budgets closely.

Today’s report showed spending on discretionary items such as hospitality, apparel, motor vehicles and durable goods such as appliances fell in the quarter. Purchases of consumable items such as groceries gained.

Household confidence may also be dented by the Reserve Bank’s decision last week to keep the Official Cash Rate unchanged at 3.25%, although policymakers did signal further cuts are expected.

At the same time, business confidence has been buffeted by uncertainty over US tariff policies and their impact on global economic growth.

Earlier Monday, Business New Zealand and Bank of New Zealand reported that the services industry contracted for a fifth straight month while the organizations last week said manufacturing had shrunk for a second consecutive month.

“The time line for New Zealand’s long-awaited economic recovery just keeps getting pushed further and further out,” said Doug Steel, senior economist at BNZ in Wellington. He expects GDP contracted in the second quarter.