Trump Repeats Claim Of 68% Tax Hike If ‘big Beautiful’ Bill Is Not Passed

Economic

Summary:

U.S. President Donald Trump on Monday repeated his claim of a 68% increase in taxes if a sweeping tax and spending cut bill backed by him does not go through.

“The failure to pass means a whopping 68% Tax increase, the largest in history!!!” Trump said in a social media post, claiming that the bill would give the “largest tax cuts and border security ever.”

Trump has repeatedly cited the 68% tax hike figure in the past, but has provided little insight into the accuracy or the reasoning behind the figure.

Non-partisan website FactCheck.org said in a June analysis that the president may be referring to the percentage of Americans who will experience a tax hike if some of his 2017 spending cuts, which his bill seeks to extend, expire this year.

As for an actual tax increase, the Ubran-Brookings Tax Policy Center, a non-partisan think tank, estimates that Americans’ taxes will rise by about 7.5% if the 2017 tax cuts are not extended.

Trump’s comment comes as policymakers debate over his “big beautiful bill” act in the Senate, with criticism directed towards the potential for the bill to even further widen the government’s fiscal deficit.

Lawmakers embarked on a marathon session on Monday to pass the bill, but rifts still persisted within the Republican party over the bill’s effects on U.S. fiscal health.

While the Republicans hold a majority in the Senate, the bill has faced resistance from more fiscally conservative members of the party.

A non-partisan analysis showed this week that the bill, in its current form, will increase U.S. debt by $3.3 trillion.

Progress of the bill through Congress had rattled U.S. debt markets, especially as U.S. Treasuries grew less attractive to domestic and foreign investors. Concerns over the fiscal impact of the bill also saw Moody’s cut the U.S. credit rating in May.

The bill, which extends Trump’s 2017 tax cuts while also increasing spending on defense and border control, comes at a time when U.S. debt levels are at a record-high $36 trillion.

Former Trump confidant Elon Musk also criticized the bill for potentially increasing national debt. Musk on Monday vowed to unseat every Republican who backed the bill.

Source: Reuters

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Economic

PMI Slips Below 50 Amid Weak Demand Conditions

According to the latest S&P Global report, Vietnam’s manufacturing sector continued to contract in June as the Purchasing Managers’ Index (PMI) dropped to 48.9 from 49.8 in May. This marked the third straight month of deterioration in business conditions, with June’s reading signifying the most severe decline since mid-2023. The PMI score—where values below 50 indicate contraction—reflects growing pressure on producers amid weakening domestic and international demand.

The central cause of the contraction lies in the persistent reduction in new orders, especially from foreign markets. The survey highlighted that while overall new orders declined slightly, new export orders dropped at a significantly faster pace—mirroring the magnitude of decline last seen in May 2023. Multiple survey respondents pointed to escalating U.S. tariffs as the main factor driving away international buyers. This is a clear causal relationship: the imposition of trade barriers has directly reduced Vietnam’s export competitiveness, leading to weaker order books.

Downturn in Orders Triggers Job and Purchasing Cuts

The softening demand environment has led firms to scale back operations. June saw accelerated job losses—the ninth consecutive month of employment reduction—with layoffs occurring at a faster pace than in May. Purchasing activity also declined after a brief increase in the previous month, indicating a broader reluctance to commit to raw material procurement under uncertain market conditions.

The decline in labor and purchasing not only reflects firms’ cost-control strategies but also illustrates a reactive causality: as new orders shrink, firms directly adjust their workforce and supply intake to align with reduced workloads.

Inventory Levels Fall as Output Continues to Rise—For Now

Despite the subdued demand, some firms continued to increase output in June, hoping to fulfill previous contracts or restock distribution chains. However, this production rise appears misaligned with the underlying weakness in orders and is unlikely to be sustainable unless demand improves. Meanwhile, inventories of both purchased inputs and finished goods declined at a sharper rate, indicating ongoing destocking in response to weak sales.

Input prices edged up modestly in June, pushing producers to raise output prices. Several manufacturers cited rising material costs, scarcity of supplies, and the depreciation of the Vietnamese đồng against the U.S. dollar as contributing factors. This reflects a mixed causal dynamic: while global commodity prices and currency depreciation push input costs higher, firms’ limited pricing power under weak demand conditions may constrain their ability to pass on these costs to customers, thereby pressuring margins.

Supplier Performance Deteriorates Due to External Disruptions

The report also noted significant delays in supplier delivery times—the worst since February. These delays were attributed to both weather-related disruptions and transportation inefficiencies, underscoring vulnerabilities in supply chain infrastructure. The performance drop in supplier delivery is a direct result of these physical and logistical bottlenecks, rather than demand-side weaknesses.

A notable bright spot was a slight recovery in business confidence after it hit a 44-month low in April. Optimism has been supported by expectations of market stabilization and reduced trade tensions. However, sentiment remains well below historical averages, suggesting firms are hopeful but unconvinced. As Andrew Harker of S&P Global noted, while output is still increasing, the underlying weakness in demand casts doubt on the sustainability of current production levels.Vietnam’s manufacturing sector is under increasing strain from declining export orders, driven in large part by U.S. tariffs. The June PMI data signals deeper structural issues, including weakening global demand, reduced labor intensity, and rising cost pressures. While some firms maintain production and express cautious optimism, the outlook remains vulnerable without tangible improvements in trade policy and international demand conditions. As such, the short-term trajectory of Vietnam’s manufacturing recovery hinges not only on internal resilience but also on external policy shifts.

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Economic

Commodity

Gold Strengthens as Market Expects Softer Fed Policy

Gold prices climbed for a second consecutive day on Tuesday, underpinned by growing expectations that the Federal Reserve may initiate rate cuts later this year. Bullion traded around $3,311 per ounce in early Asian hours, adding to Monday’s 0.9% surge. Traders have priced in increasing odds of at least two interest rate reductions in 2025, a shift in monetary outlook that has heightened gold’s appeal as a yield-free store of value.

This rise reflects a direct causal relationship: when expectations of lower interest rates rise, real yields on government bonds fall, enhancing the attractiveness of non-yielding assets like gold.

Dollar Weakness Enhances Gold’s Relative Value

The Bloomberg Dollar Spot Index fell 0.1% Tuesday, extending Monday’s 0.5% decline. Over the first half of 2025, the dollar has lost nearly 11% of its value—the worst six-month performance since 1973. The depreciating dollar has provided additional support to gold, making the metal more affordable and attractive to international investors. Here, the link between dollar weakness and rising gold prices is causal and well-established: as the value of the greenback declines, the purchasing power of other currencies increases relative to gold, boosting demand.

Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, noted that gold holds significant short-term upside potential if the dollar continues to weaken. This statement highlights a feedback loop between currency instability and capital flows into safe-haven assets like gold.

Gold Approaches Record Territory Amid Trade and Geopolitical Tensions

Gold’s rally has also been fueled by elevated trade and geopolitical risks, particularly surrounding U.S. tariff policies under President Trump. With the July 9 tariff deadline approaching, investor anxiety over global trade disruptions has resurfaced. This environment of uncertainty drives capital away from riskier assets and into safe-haven investments, further strengthening gold’s position.

Having already risen about 25% this year, gold is now trading less than $200 below its all-time high recorded in April. The combination of a declining dollar, dovish monetary expectations, and external political risks forms a convergence of causative factors propelling gold's ascent.

Other Precious Metals Rally Alongside Gold

Platinum saw a robust 0.6% increase to $1,367.10 per ounce, adding to an extraordinary 29% gain in June—the strongest monthly performance on record. This surge has been attributed to acute supply tightness and strong demand, particularly from Chinese jewelry manufacturers and speculative buying from U.S. and Chinese investors.

The movement in platinum indicates a causative link between physical market constraints (supply-demand imbalance) and sharp price appreciation. Similarly, silver and palladium also advanced, mirroring the broader positive sentiment in the precious metals complex.

Jobs Report on Horizon May Guide Market Momentum

The next potential catalyst for gold lies in Thursday’s upcoming U.S. nonfarm payrolls report. A weaker-than-expected labor market print could prompt a further decline in Treasury yields, reinforcing the case for rate cuts and potentially accelerating gold’s upward trajectory. This anticipated scenario emphasizes the interconnected relationship between macroeconomic indicators, central bank policy expectations, and commodity market behavior.

Gold’s steady rise in recent sessions underscores a broader loss of confidence in the U.S. dollar’s stability and the credibility of U.S. fiscal and monetary leadership. With markets anticipating looser monetary conditions and facing unresolved trade disputes, gold continues to draw demand as a hedge against both financial and political volatility. If these pressures persist or intensify, bullion could test new highs in the months ahead.

Source: Bloomberg

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Forex

Fiscal Uncertainty and Trade Tensions Undermine Dollar Stability

The U.S. dollar traded at its weakest level in years on Tuesday, burdened by rising fiscal anxiety and unresolved global trade tensions. The greenback’s continued decline reflects mounting investor skepticism toward the U.S.’s fiscal and monetary outlook under President Donald Trump’s administration. The proposed $3.3 trillion tax-and-spending bill, currently stalled in the Senate amid internal Republican divisions, has added to the perception of growing credit risk and policy uncertainty in the world's largest economy.

The fiscal debate coincides with looming tariff deadlines, and Trump's persistent criticism of the Federal Reserve has cast further doubt on the central bank’s independence. These combined factors have triggered a broad reassessment of the dollar’s status as a safe-haven asset.

Euro and Yen Strengthen as Investors Flee Dollar Assets

The euro rose to $1.179, its highest level since September 2021, after gaining an unprecedented 13.8% in the first half of the year. The surge reflects both fundamental strength in the eurozone economy and a shift in global capital away from dollar-denominated assets. The Japanese yen also firmed to 143.68 per dollar, having risen 9% since January—its strongest first-half performance since 2016.

While both currencies have appreciated partly due to relative economic resilience, their gains are also clearly linked to a decline in dollar demand, as investors seek alternatives amid fiscal disarray and political unpredictability in the U.S.

Dollar Index Slides Amid Broad-Based Weakness

The dollar index, which measures the greenback against a basket of six major currencies, dropped to 96.688, its lowest level since February 2022. This marks a more than 10% fall in the first half of 2025, making it the worst such performance since the dollar became a free-floating currency in the early 1970s. This shift is not merely correlational—it signals an underlying erosion of confidence in U.S. fiscal discipline and monetary coherence.

Analysts have pointed to weakening demand at Treasury auctions and waning foreign investor appetite for U.S. government debt as further evidence of this trend. Nathan Hamilton of Aberdeen Investments noted that the “bear steepening” of the yield curve, when long-term rates rise faster than short-term ones, illustrates that investors are beginning to reprice the relative credit risk of the U.S.

Pressure on the Fed Fuels Monetary Policy Concerns

Markets are increasingly pricing in a dovish turn from the Federal Reserve. Traders now expect 67 basis points of interest rate cuts by year-end, based on deteriorating economic indicators and relentless political pressure. President Trump has publicly pressured Fed Chair Jerome Powell, even sending him a list of global interest rates to argue that U.S. rates should be lowered to between Japan’s 0.5% and Denmark’s 1.75%.

Trump's open campaign against Powell and the Fed's policy stance is beginning to affect investor perceptions of the institution's credibility. Although Trump lacks the authority to remove Powell over a disagreement, his actions have introduced a new layer of volatility to monetary policy expectations.

Upcoming Economic Data Adds to Market Anxiety

Markets are now watching closely for Thursday’s nonfarm payrolls report, which is expected to show a slowdown in job growth. Economists forecast an increase of 110,000 jobs in June, down from 139,000 in May, with unemployment expected to edge up to 4.3%. A weaker-than-expected report could reinforce the case for rate cuts, compounding pressure on the already weakened dollar.

Investors are also tracking the July 9 tariff deadline set by the Trump administration. While U.S. officials continue negotiations with trade partners, few concrete agreements have been reached. Trump recently expressed dissatisfaction with progress in U.S.-Japan talks, and Treasury Secretary Scott Bessent warned that countries could still face higher tariffs regardless of ongoing discussions. This uncertainty continues to cast a shadow over global trade flows and exchange rate stability.

The dollar’s sharp drop is not merely a reaction to near-term political uncertainty but signals deeper structural concerns over fiscal sustainability, central bank independence, and the credibility of U.S. policymaking. With a fragile labor market outlook, volatile trade negotiations, and escalating internal pressure on the Fed, the U.S. dollar is facing a rare and simultaneous erosion of both its yield advantage and its safe-haven status. Markets are now bracing for further shifts in capital allocation if these uncertainties persist through the second half of 2025.

Source: Reuters

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Kevin Morgan

Economic

Surging U.S. government debt may sap investor appetite for key U.S. assets like long-dated Treasuries and the dollar, bolstering the case for turning to opportunities beyond U.S. borders, BlackRock said on Monday.

President Donald Trump's tariffs spurred market volatility this year and raised doubts over the dollar's status as the world's reserve currency. Fears of de-dollarization remain far-fetched but rising government debt could increase that risk, said fixed income executives at the world's largest asset manager.

"We’ve been highlighting the precarious position of the U.S. government’s indebtedness for some time now, and, if left unchecked, we view debt as the single greatest risk to the 'special status' of the U.S. in financial markets," they said in a third-quarter fixed income outlook note.

Congress is debating a tax and spending bill that is a key element of Trump's economic agenda and that non-partisan analysts say will add up to $5 trillion over the next decade to the U.S. federal government debt pile of more than $36 trillion.

Higher government debt could reduce the correlation between the direction of long-dated Treasury yields and monetary policy in the United States, BlackRock said, with yields rising despite the Federal Reserve cutting interest rates. Increased supply of U.S. government debt is likely to be met with lower demand from the Fed as well as foreign central banks.

That argues for diversification outside of the U.S. government bond market and for more exposure to short-dated U.S. Treasuries that could benefit from interest rate cuts, the asset manager said.

"Despite proposed spending cuts, deficits are still climbing - and more of that spending is now going toward interest payments," said BlackRock's investment managers.

"With foreign investors stepping back and the government issuing more than half a trillion dollars of debt weekly, the risk of private markets being unable to absorb this debt and consequently pushing government borrowing costs higher, is tangible," they added.

Source: Theedgemarkets

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Daily News

[Quick Facts]

1. EU will accept Trump's 10% across-the-board tariffs, sources say.

2. Trump signs executive order terminating sanctions on Syria.

3. U.S. Treasury Chief signals Fed leadership change on horizon.

4. Goldman Sachs moves up Fed rate cut forecast to September.

[News Details]

EU will accept Trump's 10% across-the-board tariffs, sources say

The European Union is willing to accept a trade agreement with the United States featuring a 10% across-the-board tariff on many EU exports, but seeks U.S. commitment to lower tariffs for critical sectors such as pharmaceuticals, alcohol, semiconductors, and commercial aircraft, according to sources familiar with the matter. The EU is also pushing for quotas and exemptions from the U.S. to effectively mitigate its 25% tariffs on automobiles and auto parts, as well as 50% tariffs on steel and aluminum.

Sources indicate that Maroš Šefčovič, the EU's trade chief, will lead a delegation to Washington this week to advance negotiations. The European Commission further aims to ensure that both existing U.S. sectoral tariffs (e.g., on autos and metals) and planned future tariffs are addressed.

Trump signs executive order terminating sanctions on Syria

The White House announced on June 30th that President Trump signed an executive order ending sanctions against Syria.

The statement noted that the order eases export controls on certain goods and lifts restrictions on foreign assistance to Syria. A senior U.S. Treasury official stated this would end Syria's isolation from the international financial system.

In 1979, the U.S. government designated Syria as a "state sponsor of terrorism," imposing arms embargoes, economic sanctions, and other measures. Following the 2011 Syrian crisis, the U.S. escalated sanctions. In 2019, during his first term, Trump signed the so-called Caesar Syria Civilian Protection Act, imposing financial and other sanctions on Syrian government officials, as well as individuals and entities funding the Syrian government.

U.S. Treasury Chief signals Fed leadership change on horizon

U.S. Treasury Secretary Bessent expressed confidence during a Monday interview with Bloomberg Television that Trump's comprehensive tax legislation would advance, anticipating the president would sign the bill before July 4th.

Bessent further stated that tariffs had not triggered inflation, but the Federal Reserve appeared "idle." Trump is considering appointing Powell's successor early next year and hinted that current Fed governors are candidates. This follows Trump's renewed criticism of the central bank, asserting that "Mr. Too Late" Jerome Powell and the entire Federal Reserve Board should feel ashamed for not cutting rates.

Goldman Sachs moves up Fed rate cut forecast to September

Goldman Sachs's latest forecast indicates the Fed will cut rates by 25 basis points each at its September, October, and December meetings while lowering its terminal rate projection from the previous 3.5%-3.75% to 3%-3.25%. The report notes tariff-driven inflation effects were "slightly weaker than expected," and factors such as increased anti-deflationary force, substantial labor market weakness, or panic induced by volatile monthly data could prompt an earlier September cut. Should preventative cutting motives emerge, consecutive meeting cuts, as in 2019, would be the most natural approach.

However, Goldman Sachs analysts clarified that unless this week's jobs data falls far short of expectations, no rate cut is penciled in for the July meeting.

[Today's Focus]

UTC+8 14:30 Switzerland May Real Retail Sales Year-on-Year

UTC+8 15:55 Germany June Seasonally Adjusted Unemployment Rate

UTC+8 17:00 Eurozone June CPI MoM Preliminary Estimate

UTC+8 21:30 ECB Forum – Panel Discussion with Key Global Central Bank Governors

UTC+8 22:00 US June ISM Manufacturing PMI

UTC+8 22:00 US May JOLTs Job Openings (in 10K)

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Economic

Markets Cautious as U.S. Fiscal Policy Hangs in the Balance

Asian stock markets advanced slightly on Tuesday, driven by cautious optimism as traders tracked developments surrounding the United States' expansive fiscal agenda. The debate over President Donald Trump’s proposed tax-cut and spending package—dubbed the "One Big Beautiful Bill"—continued into the Asian trading session, delaying a vote initially expected before July 4. The bill, estimated to expand U.S. debt by $3.3 trillion, has become a focal point for global market sentiment.

Investors remained alert to both the content of the legislation and the political friction it has sparked. The prolonged debate, involving a stream of proposed amendments from both Republican and Democratic lawmakers, has added uncertainty to a market environment already sensitive to interest rate expectations and global trade dynamics.

Dollar Weakens as Senate Gridlock and Fed Outlook Intersect

The U.S. dollar drifted near multi-year lows as investors priced in delays and political complexity surrounding fiscal policy. The greenback dropped 0.3% to 143.62 yen, while slipping 0.1% against the euro to $1.1794, touching its weakest level since September 2021.

The dollar’s decline reflects both political uncertainty and expectations that upcoming U.S. payroll data could influence the Federal Reserve’s rate trajectory. While the currency move is correlated with the ongoing legislative debate, the potential causal driver lies in how these fiscal outcomes may alter economic conditions that shape central bank decision-making.

Asian Equities Find Some Support, Led by South Korea

Despite the overhang of U.S. political developments, Asian equities rose modestly, with MSCI’s broadest index of Asia-Pacific shares outside Japan gaining 0.5%. South Korea’s Kospi index led regional gains, climbing 1.8%, suggesting investor confidence in selected local fundamentals or sector-specific momentum.

Japan’s Nikkei index, however, diverged, falling as much as 1.1% as the yen’s appreciation weighed on export-heavy sectors. The inverse relationship between yen strength and Japanese equities remains a consistent causal pattern—stronger yen diminishes competitiveness of overseas sales, thereby pressuring stock valuations.

Commodities Diverge: Gold Advances, Oil Slides

Commodities reflected the market’s mixed risk posture. Spot gold prices increased 0.5% to $3,319.55 per ounce, supported by both dollar weakness and safe-haven demand amid fiscal policy and monetary uncertainty. The movement in gold demonstrates a clear causal relationship: weaker dollar and rising geopolitical or economic ambiguity tend to lift gold prices as investors seek stability.

Conversely, U.S. crude oil declined for the second consecutive session, falling 0.4% to $64.86 per barrel. The decline was linked to expectations that OPEC+ may raise production in August, a factor that would increase supply and potentially curb price growth. Here, the price reaction is a direct causal response to anticipated changes in production levels.

European Futures Signal Cautious Optimism

European markets appeared poised for a subdued open, with Euro Stoxx 50 futures up 0.1% and German DAX futures rising 0.2%. These small gains mirror the restrained sentiment in Asia, indicating that global markets are awaiting clarity on U.S. fiscal decisions before committing to stronger directional bets.

While Asian equities found limited upward traction, broader market sentiment remains cautious due to the unresolved U.S. fiscal debate. The weakening dollar, firming gold, and falling oil reflect diverging investor expectations across asset classes, highlighting uncertainty over inflation, monetary policy, and global demand. Until the contours of Trump’s $3.3 trillion bill become clear, markets are likely to stay reactive and fragmented, responding not only to U.S. political headlines but also to incoming labor and trade data later in the week.