Trump’s 100% Tariff Threat on Russian Export Buyers Redefines Trade as a Tool for Peace

Economic

Summary:

In a dramatic shift of strategy, President Trump’s proposed 100% secondary tariffs on countries trading with Russia aim to force a diplomatic resolution to the Ukraine war....

Turning Tariffs into a Weapon for Peace: Trump's New Diplomatic Gamble

In a striking twist on traditional trade policy, U.S. President Donald Trump has threatened 100% secondary tariffs on countries that continue purchasing Russian exports, unless Moscow agrees to end its war in Ukraine within 50 days. Speaking during a high-profile Oval Office meeting with NATO Secretary General Mark Rutte, Trump framed these unprecedented measures as a moral imperative, not just a geopolitical tactic.

The proposed secondary tariffs levied not on Russia directly but on its trading partners represent a radical departure from conventional trade sanctions. Trump’s plan is aimed at squeezing Russia’s economic arteries by targeting its oil customers, primarily China, India, and Turkey. According to the International Trade Centre, these three countries accounted for the bulk of Russian exports in 2024, making them potential direct targets of U.S. trade penalties.

While the strategy has garnered criticism for risking a global backlash, some commentators suggest it signals a rare use of economic force in service of peace rather than profit. If successful, it could set a new precedent for enforcing international norms through market-based deterrence.

China’s Resilience and U.S. Markets React Cautiously

Even as these secondary tariffs loom, the global economy shows signs of surprising resilience. China’s second-quarter GDP grew 5.2% year-on-year, slightly exceeding Reuters’ 5.1% forecast. However, the pace slowed compared to Q1’s 5.4% indicating the world's second-largest economy is still feeling the weight of internal challenges, despite outperforming expectations.

Meanwhile, U.S. stock markets responded with modest gains. Investors appeared to shrug off Trump’s intensifying rhetoric, buoyed instead by news that the White House will allow Nvidia to resume chip exports to China. Nvidia confirmed on Tuesday that it will be granted licenses to ship H20 chips designed specifically for China despite ongoing U.S. tech restrictions.

These moves signal a careful balance within the administration: hawkish toward adversaries like Russia, but pragmatically open with China when it serves American commercial and strategic interests.

Gold’s Rally Resumes as Tariff Tensions Rise

In response to the mixed signals from Washington, gold prices rallied 0.5% to $3,360.86 an ounce, reclaiming ground lost earlier this week. The metal’s role as a safe-haven asset has grown stronger amid escalating trade threats and growing investor uncertainty. Although gold recently hit a record high above $3,500, its momentum had paused over the past three months as markets waited for policy clarity.

Now, with the specter of 100% tariffs and global economic fragmentation, analysts remain cautiously bullish. City Index’s Fawad Razaqzada noted that if trade negotiations collapse before August, bullion could surge past its April highs.

A Billion-Dollar Wooden City Takes Root in Europe

Away from geopolitics, Europe is pushing boundaries in sustainable development. In Sickla, on the edge of Stockholm, Sweden is preparing to launch “the world’s largest wooden construction project.” Atrium Ljungberg AB is investing 12 billion SEK (around $1.25 billion) in what it calls Stockholm Wood City an eco-district built from cross-laminated timber. The project signals Europe’s resolve to prioritize sustainability despite market volatility.

As the world’s power players clash over trade and diplomacy, projects like Stockholm Wood City offer a quiet yet powerful counter-narrative where long-term resilience and environmental foresight compete with headline-driven volatility.

Trump’s tariff ultimatum reframes trade as a strategic force in global conflict resolution, opening a provocative chapter in international diplomacy. While risky, it underscores the growing entanglement between commerce and geopolitics in a world where every trade decision doubles as a political signal. Whether this gamble will lead to peace or provoke economic retaliation remains uncertain, but it undoubtedly reshapes the narrative around how tariffs are understood and used.

Source: CNBC

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Economic

Budget Strains Mount as Reeves Prepares Key Policy Speech

Chancellor Rachel Reeves’ upcoming Mansion House speech is shaping up to be one of the most consequential fiscal addresses of the year, as the UK grapples with deepening concerns over its growing budget deficit and sluggish economic outlook. With public debt now hovering near 100% of GDP and the Autumn Budget approaching, investors and analysts are calling for concrete measures to restore market confidence and reinvigorate growth.

Reeves’ statement last year, proclaiming economic growth as a "national mission," has not been convincingly realized, according to market observers. A mix of muted private investment, policy hesitations, and structural fiscal burdens has weighed on sentiment. Now, as the Labour government nears its first full fiscal year in office, expectations are high for a more aggressive roadmap to tackle the UK’s long-term economic fragilities.

Fiscal Dilemma: Revenue Shortfall vs. Political Red Lines

The core of the government’s challenge lies in limited fiscal maneuverability. Despite pledges to maintain the “triple lock” on pensions ensuring annual increases based on the highest of inflation, wage growth, or 2.5% the long-term fiscal burden continues to rise. The Office for Budget Responsibility forecasts that state pensions could cost up to 7.7% of GDP by the early 2070s, driven by an aging population.

However, with Reeves also promising no tax increases on “working people,” the government has boxed itself in. George Buckley, chief UK economist at Nomura, noted that eliminating a significant portion of tax levers limits flexibility, raising fears that Reeves could turn to politically fraught alternatives such as increased levies on banks or wealth taxes. Yet even these options are problematic: a wealth tax could prompt capital flight, and greater bank levies risk undermining London’s competitiveness in global finance.

Pensions, Red Tape, and Structural Reform on the Agenda

One of the anticipated centerpieces of Reeves’ speech is an overhaul of the UK pension system. With pension costs rising and private savings inadequate for many, the government aims to address long-term financial adequacy without dismantling the politically sensitive triple lock. Potential changes to pension tax reliefs or employer contributions could emerge, although any aggressive reforms may spark backlash.

Meanwhile, the Treasury plans to cut regulatory burdens to stimulate financial sector efficiency. One proposal under review is the partial repeal of the Senior Managers and Certification Regime, which governs accountability for nearly 140,000 professionals in finance. This deregulation push is part of a broader strategy to attract investment and improve productivity, especially as high inflation and weak growth dampen real incomes.

In contrast, recent reports suggest Reeves has abandoned earlier proposals to reform ISAs (Individual Savings Accounts), amid criticism from building societies and consumer advocacy groups. This retreat adds to concerns about policy inconsistency, especially following U-turns on welfare cuts and winter fuel support reversals that have already weakened confidence in the Treasury’s long-term strategy.

Markets Await Concrete Action, Not Rhetoric

With the Autumn Budget looming, the Mansion House speech offers Reeves a platform to stabilize investor expectations and frame a compelling fiscal vision. However, markets are unlikely to be swayed by vague commitments. Analysts warn that unless Reeves outlines specific revenue sources or credible structural reforms, the UK risks drifting into a period of prolonged fiscal vulnerability.

For now, investor sentiment remains fragile. Any signals around new taxes, spending priorities, or regulatory changes will be closely parsed not just for their economic implications, but also for their political sustainability. The challenge facing Reeves is to navigate a narrowing fiscal path without triggering either a market backlash or political revolt a task that could define her tenure.

Source: CNBC

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Commodity

Gold Rebounds Amid Confusion Over U.S. Trade Strategy

After a mild decline in the previous session, gold prices climbed on Tuesday as the market absorbed conflicting signals from U.S. trade officials and President Donald Trump. The yellow metal gained 0.5% to reach $3,360.86 per ounce in Singapore, reversing Monday’s pullback, as investors remained on edge amid persistent geopolitical and economic uncertainty.

President Trump’s remarks that the U.S. remains open to further talks with key trade partners including the European Union offered a momentary reprieve from mounting tensions. However, these comments were seemingly contradicted by his assertion that formal letters sent to foreign governments outlining tariff terms already constitute final deals. This inconsistency cast fresh doubt on the credibility and flexibility of ongoing negotiations.

Gold's Status as a Safe Haven Remains Intact

Gold’s performance in 2025 has largely reflected its traditional role as a hedge against uncertainty and policy volatility. The metal surged over 25% earlier this year, reaching a record high above $3,500 per ounce in April, driven by the chaotic global trading environment, Fed rate policy uncertainty, and erratic tariff implementations.

While the rally has stalled over the past three months, analysts argue that the underlying bullish momentum remains intact particularly if talks break down in the lead-up to the August 1 tariff deadline. According to Fawad Razaqzada of City Index, gold could “easily retest or breach its former highs” should negotiations deteriorate again. However, he also acknowledged that the market is in a “wait-and-see mode,” with traders wary of further long positions at historically high price levels.

Broader Precious Metals Complex Sees Mixed Action

In parallel markets, silver was little changed after touching a 14-year high on Monday before retracing gains. Platinum and palladium both posted modest increases, reflecting ongoing strength in industrial demand, though the broader direction for precious metals remains heavily tied to U.S. trade rhetoric and the dollar’s movement.

The Bloomberg Dollar Spot Index held steady, consolidating after Monday’s 0.3% gain. A stronger dollar typically pressures gold by making it more expensive for foreign buyers, yet in this case, gold’s resilience suggests safe-haven demand is overriding short-term currency headwinds.

A Cautiously Bullish Market

As the clock ticks toward the next round of tariff enforcement and G20 policy meetings, the gold market remains buoyed by geopolitical friction and economic uncertainty. Despite the recent plateau in gains, the metal’s fundamental drivers risk aversion, distrust in political consistency, and hedge-seeking behavior remain in place.

Unless clearer signals emerge from Washington or a breakthrough is made in trade discussions, gold’s upward bias is likely to persist in the near term, with $3,500 again becoming a potential target if tensions escalate.

Soiurce: Bloomberg

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Forex

Economic

Key points:

●Traders watch U.S. inflation data for signs of tariff impact

●Fed has said CPI may rise in U.S. summer as it held off cutting rates

●Aussie dollar, yuan shrug off resilient Chinese GDP figures

The dollar hovered near a three-week high versus major peers on Tuesday as traders awaited the release of U.S. inflation data later in the day that could provide clues on the path for monetary policy.

The U.S. currency was also buoyed by elevated Treasury yields, with investors weighing a potential exit of Jerome Powell from the Federal Reserve as President Donald Trump continued his criticism of the central bank chairman.

Currencies showed little reaction to data showing China's economy grew 5.2% last quarter, slightly topping analysts' forecasts.

Bitcoindrifted further from Monday's all-time peak of $123,153.22 following a seven-day, 14% surge as investors bet on long-sought legislative policy wins for the cryptocurrency industry this week. It was changing hands at around $117,550 as of 0520 GMT.

The dollar was little changed at 147.62 yen, after earlier rising to the highest since June 23 at 147.89 yen.

The dollar index, which tracks the currency against the yen, euro and four other major rivals, eased slightly to 98.003, not far below the overnight peak of 98.136, the highest since June 25.

The euroedged up to $1.1681, after dipping to $1.1650 on Monday for the first time since June 25.

Fed Chair Powell has said he expects inflation to increase this summer as a result of tariffs, which is seen keeping the U.S. central bank on hold until later in the year.

Economists polled by Reuters expect headline inflation to increase to 2.7% on an annual basis, up from 2.4% the prior month. Core inflation is expected to rise to 3.0%, from 2.8%.

"Should inflation fail to materialise or remain steady, questions may arise regarding the Fed's recent decision not to cut rates, potentially intensifying calls for monetary easing," James Kniveton, senior corporate FX dealer at Convera, wrote in a client note.

"Calls from the White House for leadership changes at the Fed may increase."

Trump on Monday renewed his attacks on Powell, saying interest rates should be at 1% or lower, rather than the 4.25% to 4.50% range the Fed has kept the key rate at so far this year.

Fed funds futures traders have been pricing in about 50 basis points of interest rate cuts by year-end, with the first quarter-point reduction seen as likely in September.

"If Powell leaves, we expect the (U.S. Treasury yield) curve to steepen sharply, with the short-end factoring in front-loaded rates cuts," DBS analysts wrote in a note.

"Meanwhile, the loss of confidence in price stability should translate into sharply higher 10-year and 30-year yields."

China's economic growth topped market forecasts in the second quarter - even as it slowed slightly from the prior three months - in a sign of resilience against U.S. tariffs.

At the same time, analysts warned of underlying weakness and rising risks later in the year that will ramp up pressure on Beijing to roll out more stimulus.

The Chinese yuanweakened slightly to 7.1766 per dollar in offshore trading.

The Aussiewas steady at $0.6548.

Source: TradingView

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Economic

A Devastating Shift in Transatlantic Trade Relations

The European Union faces a looming trade crisis as President Donald Trump threatens to impose a sweeping 30% tariff on European imports. Should this be implemented by the August 1 deadline, it would upend long-standing trade flows and deliver a direct blow to the EU’s $1.7 trillion economic relationship with the United States.

European Trade Commissioner Maros Sefcovic bluntly described the scenario as one that would “practically prohibit trade,” signaling that such a tariff would dismantle the viability of transatlantic commerce as it currently exists. Efforts are still underway in Brussels to negotiate a fallback agreement preserving the current 10% baseline tariff and carving out protections for vital sectors such as autos and machinery.

However, Trump’s erratic posture toward the EU oscillating between calling it a partner and accusing it of harming U.S. interests has made negotiations volatile. With the goods trade deficit between the U.S. and EU standing at $235 billion, Trump’s focus remains firmly on correcting this imbalance, regardless of the broader economic consequences.

Immediate Economic Fallout and ECB Response

Should tariffs rise to the proposed 30% level, the macroeconomic consequences would be swift. Economists at Barclays project that reciprocal tariffs and sector-specific duties could collectively shave 0.7 percentage points off euro zone GDP, potentially wiping out nearly all forecasted growth for the year. Such a blow would almost certainly prompt the European Central Bank to reverse course on interest rates, possibly cutting its deposit rate from 2% down to 1% by March 2026.

In Germany, the economic stakes are especially high. A prior study by the IW economic institute found that tariffs ranging from 20% to 50% would cost Europe’s largest economy over €200 billion by 2028. German Chancellor Friedrich Merz has already acknowledged that a 30% tariff would derail his domestic economic agenda, which includes long-overdue tax cuts and public investment programs. The German export sector, a pillar of its economic model, would be hit “to the core,” he warned.

Strategic and Structural Ramifications

Beyond the immediate economic costs, Trump’s tariff threat forces Europe to confront deeper questions about the sustainability of its export-led model. With nearly half of the EU’s GDP tied to exports, the region has relied on external demand to compensate for sluggish domestic consumption and fragmented capital markets.

Although the EU has made progress in diversifying trade through deals with new partners, these efforts remain incomplete and slow-moving. The long-stalled EU-Mercosur agreement illustrates the difficulty of finalizing comprehensive trade pacts that could provide meaningful alternatives to U.S. markets.

Internally, Europe’s own single market remains riddled with national regulations that effectively act as barriers to trade. According to the IMF, these internal frictions amount to the equivalent of 44% tariffs on goods and a staggering 110% on services. Analysts like Varg Folkman at the European Policy Centre argue that this moment of crisis may finally provide the political urgency to undertake long-overdue structural reforms including harmonizing regulations and deepening capital markets. But achieving consensus across 27 member states remains a formidable challenge.

Limited Leverage in Negotiations

As the August deadline approaches, EU officials continue to project readiness for retaliation while leaving the door open to negotiations. However, they acknowledge that their bargaining power is limited given the asymmetry in global influence and Trump’s unpredictability.

One intriguing possibility raised by analysts is that Trump’s own desire for a rate cut from the Federal Reserve could be delayed by rising economic uncertainty from the tariff standoff. AXA chief economist Gilles Moec noted that the unclear “landing zone” for tariffs creates policy hesitancy, making it more difficult for the Fed to justify loosening monetary conditions a potential strategic lever for the EU in ongoing talks.

A Moment of Reckoning for Europe

The 30% tariff threat is more than a transatlantic trade dispute; it is a seismic challenge to Europe’s economic identity and global role. If implemented, it would severely damage industrial output, undermine confidence, and expose the fragility of Europe’s dependence on external demand.

Whether this moment becomes a catalyst for reform or a period of economic regression will depend on how effectively European leaders can adapt. But one thing is clear: the postwar trade consensus that defined EU-U.S. relations for decades is now under existential threat.

Source: Reuters

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China–U.S. Trade War

Economic

U.S. No-Show Deepens Concerns Over G20’s Role

The absence of Treasury Secretary Scott Bessent from the Durban G20 meeting has drawn sharp criticism, especially given his previous no-show in February’s Cape Town session. Analysts fear that the absence of representation from the world’s largest economy undermines the G20’s legitimacy and long-term viability. According to Josh Lipsky from the Atlantic Council, it signals a strategic U.S. pivot toward a leaner, less engaged G20 approach as Washington prepares to assume the presidency in 2026.

This retreat coincides with Donald Trump’s aggressive trade agenda, notably a sweeping 10% base tariff on all imports, with sector-specific rates reaching 200% on pharmaceuticals and 50% on metals. The tariff campaign is set to expand further on August 1, targeting 25 countries including several BRICS members an escalation that fuels mistrust and threatens to fragment global cooperation.

G20 vs BRICS: Emerging Institutional Tensions

This year's G20 is particularly fragile due to overlap with the expanded BRICS bloc. Eight current G20 members including host South Africa are also BRICS nations, creating a fault line between Western-aligned and Global South participants. Trump’s combative stance toward BRICS adds friction, with fears that the G20 may splinter into competing forums amid declining confidence in traditional Western-led institutions.

As South African Reserve Bank Deputy Governor Fundi Tshazibana noted, “policy uncertainty” now overshadows the G20’s core mandate of economic coordination and stability. Once a vital tool in the 2008 global financial crisis, the G20 now faces internal divergence over values and policy goals.

Africa’s Economic Challenges Highlight Growing Disparity

Durban’s summit also unfolds against deepening financial strain across Africa. According to Goldman Sachs, Sub-Saharan Africa’s external debt has ballooned to $800 billion about 45% of GDP while Chinese financing has sharply declined. Trevor Manuel, chair of the G20 Africa Expert Panel, warned that Beijing’s lending expectations, once agreed, offer little flexibility. This rigid structure, compounded by diminished U.S. and European grant aid, exposes African nations to severe financing gaps and limited options.

The Belt and Road Initiative, while previously a major source of infrastructure investment, now faces criticism for lacking transparency and burdening recipient nations with unsustainable debt. Meanwhile, European and U.S. aid has shifted towards domestic defense priorities, sidelining African development needs.

Lumkile Mondi of the University of Witwatersrand stressed that Africa’s mounting debt, sluggish GDP growth, and geopolitical marginalization could severely hinder long-term investment prospects. “Africa is in a difficult space,” he remarked bluntly.

Climate Policy Overshadowed by Global Rifts

South Africa had intended to use its presidency to push rich nations on climate finance and North-South solidarity. However, these goals have been sidelined as trade wars and aid suspensions dominate the agenda. The G20 financial stability board released a new plan to address climate-related risks but paused further policy work due to the U.S. withdrawal from key climate finance discussions.

This policy rollback casts a shadow over the Durban meeting, with the South African Treasury offering no concrete goals ahead of the summit. Duncan Pieterse, Director General of Treasury, confirmed that they aim to release a formal communiqué after the talks, though expectations are muted.

The Durban summit is emblematic of a G20 struggling to retain cohesion. U.S. disengagement, BRICS assertiveness, and growing North-South distrust paint a picture of fragmentation rather than consensus. As global financial institutions splinter along geopolitical lines, the G20 risks losing its relevance just when coordinated action is most needed. Without clearer direction and commitment from its largest members, the G20 may continue to drift, overshadowed by nationalist agendas and a shifting balance of power.

Source: Reuters

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Economic

Bond

Rising Yields Reflect Election Uncertainty and Fiscal Risk

On Tuesday, Japan’s 10-year government bond yield jumped to 1.599%, marking its highest point since 2008. Meanwhile, the 30-year yield reached an unprecedented 3.21%, and 20-year bonds hit levels last seen in 1999. The sharp rise in yields comes amid speculation that the upcoming Upper House election could usher in policies favoring tax cuts and increased spending, deepening the government’s fiscal imbalance.

According to Ken Matsumoto of Crédit Agricole CIB, expectations of post-election fiscal expansion are driving long-term yields higher. The policy debate surrounding the election has become increasingly centered on potential consumption tax cuts, adding volatility to the bond market.

A Divided Political Landscape Triggers Investor Anxiety

While Prime Minister Shigeru Ishiba maintains his opposition to tax cuts financed by more debt, opposition parties are rallying around more populist measures pushing for consumption tax reductions and greater spending commitments. The uncertainty over Japan’s future fiscal path has triggered what analysts call a "bond vigilante" response.

Amir Anvarzadeh from Asymmetric Advisors warned that talk of tax cuts is perceived as "suicidal" for a country with one of the highest public debt ratios in the world. "Investors are demanding more yield to offset the rising risk," he said. This growing skepticism has led to increased short-selling of Japanese government bonds (JGBs), further fueling the yield surge.

Underlying Macro Pressures Add to the Tension

Beyond the political noise, structural issues are also pushing yields higher. Tokyo’s inflation slowed slightly to 3.1% year-on-year in June, down from 3.6% in May, but still remains elevated. Carlos Casanova of Union Bancaire Privée noted that this could force the Bank of Japan (BOJ) to revise its inflation outlook upward, potentially expediting the timing of its next rate hike.

Simultaneously, supply-demand dynamics in the bond market are shifting. Japanese life insurers, traditionally major bond buyers, are showing reduced appetite, adding to concerns over who will absorb the increased bond issuance. Masahiko Loo from State Street warned of growing supply-demand imbalances that could persist if fiscal pressures intensify.

BOJ’s Gradual Tightening Offers Limited Relief

The BOJ has so far adopted a cautious approach. It kept its policy rate unchanged at 0.5% in June and reaffirmed plans to taper its government bond purchases slowly, targeting a ¥400 billion reduction per quarter until March 2026. While the central bank aims to balance economic support with long-term sustainability, its limited policy maneuverability raises doubts about its ability to rein in market volatility should political risks materialize.

With bond yields surging and political rhetoric intensifying ahead of Sunday’s election, Japan faces a precarious balancing act. Markets are demanding fiscal restraint, but politicians are floating populist tax cuts that may worsen long-term debt sustainability. Unless clearer policy direction emerges post-election, Japan could find itself trapped between market distrust and political pressure both of which risk destabilizing its fragile economic recovery.