Trump’s US-Vietnam Trade Deal Draws China’s Stern Glare

Economic

Political

Summary:

President Donald Trump’s administration is looking to bookend the 90-day reprieve from his “Liberation Day” tariffs with at least some limited agreements announced around the US Independence Day holiday weekend.

Six days ahead of the July 9 deadline, Trump on Wednesday announced a pact with Vietnam, a popular “plus one” supplier for many American companies diversifying away from China in recent years.

On Thursday, however, Vietnam said negotiation teams are still cooperating and working to finalize the details after Trump’s call with Vietnamese party chief To Lam, according to foreign ministry spokesperson Pham Thu Hang at a briefing in Hanoi.

Done deal or not, China said it was examining the US-Vietnam accord and threatened to retaliate if its interests were hurt.

The reason for the latest warning: a key element in Trump’s plans for Vietnam is a two-tiered system — 20% tariffs on all imports and a 40% duty on goods deemed to be transshipped through the Southeast Asian country. That’s aimed at Chinese companies operating in Vietnam to avoid higher Trump tariffs.

Meanwhile, Indonesia will aim for a tariff rate lower than Vietnam’s as it negotiates with Washington to bring down its levy from a threatened 32%, an official told reporters in Jakarta on Thursday.

The US and Indonesia will sign trade and investment pacts worth $34 billion as part of efforts to secure a deal on tariffs ahead of a July 9 deadline.

Isolating China | The trade truce between Washington and Beijing may be holding for now, but China is increasingly wary about what’s happening elsewhere: US efforts to forge deals that could isolate Chinese firms from global supply chains. Ahead of a July 9 deadline, US officials are deep in talks with major trading partners in Asia and Europe, pushing for new agreements that would include restrictions on Chinese content, or secure commitments to counter what Washington sees as China’s unfair trade practices.

Source: Bloomberg Europe

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Economic

Stocks

Investors Pause as Labor Market Data Takes Center Stage

U.S. stock futures traded in a narrow range on Thursday as market participants braced for the release of the June nonfarm payrolls report. With equities recently setting record highs, investors are looking to the employment data for confirmation of economic resilience or signs of weakening that could shift the Federal Reserve’s rate outlook.

The S&P 500 and Nasdaq ended Wednesday’s session at all-time highs, boosted by strength in technology shares and relief over a trade deal between the United States and Vietnam, which helped calm fears of escalating protectionism. In contrast, the Dow Jones Industrial Average remained about 1.3% below its peak from December, reflecting more muted performance in traditional industrials.

Fed’s Policy Path Hinges on Labor Trends

Expectations for the jobs report point to further labor market cooling, with analysts forecasting the unemployment rate to edge up to 4.3%—its highest since late 2021. A softer report could challenge Fed Chair Jerome Powell’s current stance of maintaining restrictive policy due to sticky inflation and what he sees as a still-solid labor market.

According to CME FedWatch, traders now assign a 25% probability of a rate cut in the Fed’s July meeting, up slightly from 20% a week ago. This implies that any material downside surprise in the data could tip market expectations more decisively toward imminent policy easing.

The employment report, set for early release due to the July 4 holiday, will be accompanied by weekly jobless claims and updates on U.S. services sector activity. A weaker services PMI or rising jobless claims would reinforce arguments for a less restrictive policy approach, especially in light of growing economic uncertainty tied to ongoing policy changes.

Macro Landscape Complicated by Fiscal Developments

Adding another layer of complexity to the Fed’s decision-making is the advance of President Donald Trump’s major tax-and-spend legislation, which is heading toward a final vote in the House. If passed, the bill could add $3.4 trillion to the national debt over the next decade, according to nonpartisan projections. While this fiscal stimulus may support short-term growth, it may also increase inflationary risks, making the Fed’s next steps more delicate.

Several individual stocks posted sharp gains in early trading. Synopsys and Cadence Design Systems led the tech space higher, rising 6.7% and 5.9%, respectively, after the U.S. lifted restrictions on chip design software exports to China. The move signals a thaw in U.S.-China trade tensions and reinforces bullish sentiment in the semiconductor sector.

Tripadvisor shares jumped 4.9% following reports that activist investor Starboard Value has acquired a more than 9% stake in the company, potentially setting the stage for strategic changes. Datadog soared 10.2% after news it will be added to the S&P 500, replacing Juniper Networks, reflecting growing investor confidence in its growth trajectory within the cloud and cybersecurity segments.

With markets closed early for the Independence Day holiday and volumes expected to thin, Thursday’s session centers on the payrolls report and its implications for Federal Reserve policy. While recent equity gains have reflected optimism in select sectors and easing trade tensions, the durability of this rally may hinge on the tone of labor market data. A cooler report could shift the Fed toward a dovish bias, while signs of continued strength may extend current policy caution. Either way, investors are poised for a pivotal signal that will shape rate expectations heading into the second half of the year.

Source: Reuters

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Michelle

Cryptocurrency

Ethereum's ecosystem is witnessing multiple bullish indicators, with recent community actions and market trends converging to suggest a price surge for ETH.

Ethereum's current trajectory suggests potential growth due to rising ETF inflows and reduced exchange balances, indicative of longer-term holding by investors.

Eric Conner, a noted Ethereum advocate, underscores the ecosystem's potential, describing it as a "powder keg" fueled by a confluence of bullish on-chain signals. His analysis aligns with the broader sentiment observed across community and investor circles.

In July 2025, Ethereum's price surged by over 6%, driven by rising stablecoin values and decreased ETH supplies on exchanges. This activity reflects investors' anticipation of further gains and reduced immediate selling pressures.

Zak Cole's introduction of the Ethereum Community Foundation marks a significant development, showcasing renewed independent support to meet evolving community needs. His initiative complements the existing efforts by the Ethereum Foundation.

"We've launched the Ethereum Community Foundation to address new priorities and community needs independently." — Zak Cole, Ethereum Core Developer

Immediate market impacts include rising ETH prices, greater stablecoin activity on Ethereum's mainnet, and notable ETF inflows. Such dynamics indicate investor confidence and expectations of sustained asset appreciation.

As historical patterns predict similar market recoveries, Ethereum's potential growth aligns with past trends, suggesting a positive outlook for its major DeFi platforms, stablecoins, and staking protocols.

Regulatory impact remains minimal due to no recent statements from major governing bodies. However, rising institutional engagement, ETF expansions, and innovative community initiatives are expected to support Ethereum's price momentum throughout 2025.

Source: CryptoSlate

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Economic

Jakarta Seeks Relief from U.S. Tariff Threat

In a strategic move to protect its access to the U.S. market, Indonesia will sign a $34 billion agreement with American business partners next week, aiming to boost imports and investments tied to the bilateral trade relationship. The deal, scheduled for July 7, comes just days before a crucial July 9 deadline for tariff negotiations with the United States. According to Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, the agreement is designed to rebalance trade and improve Jakarta’s negotiating position with Washington.

Indonesia is currently at risk of being hit with a 32% tariff on its exports to the U.S., a development that would significantly impact its export competitiveness. To mitigate this risk, Jakarta has proactively offered to increase its import volumes from the U.S., framing the upcoming deal as both a commercial and diplomatic tool.

Trade Surplus Creates Pressure for Concessions

The underlying issue stems from Indonesia’s substantial trade surplus with the United States, which reached $17.9 billion in 2024, according to figures from the U.S. Trade Representative. This imbalance has drawn scrutiny under the Trump administration’s intensified focus on bilateral trade deficits. By committing to large-scale purchases and investment cooperation, Indonesia is signaling its willingness to adjust the trade dynamic and meet some of Washington’s demands without resorting to tariff escalation.

Minister Airlangga emphasized that the $34 billion memorandum of understanding will channel funds into U.S. purchases and Indonesian outbound investments, effectively aligning with U.S. policy preferences to spur export-led job creation. While details of the specific sectors involved remain undisclosed, the announcement reflects Jakarta’s desire to avoid the punitive measures applied to other nations.

Competitive Comparison with Vietnam's Deal

Indonesia’s strategy also reflects its concern over recent U.S. trade concessions granted to Vietnam. On Wednesday, Washington announced it would reduce planned tariffs on Vietnamese exports from 46% to 20%, signaling a more flexible stance when trading partners show willingness to cooperate. Airlangga acknowledged this in his comments, stating Indonesia seeks a deal “better than the one struck with Vietnam.”

This comparison underscores the regional dimension of the U.S. trade agenda in Southeast Asia, where countries are jockeying for preferential treatment amid a shifting tariff landscape. With the United States actively pursuing deals across the region, Indonesia is under pressure to present itself as a constructive and economically valuable partner.

Indonesia’s $34 billion pact with U.S. firms represents a calculated maneuver to secure favorable terms ahead of a looming tariff deadline. By proactively addressing the trade imbalance and signaling commercial alignment with U.S. priorities, Jakarta aims to protect its critical export industries and maintain its competitive edge in the American market. As the July 9 deadline approaches, the success of this strategy will hinge on Washington’s willingness to reward Indonesia’s concessions with tangible tariff relief.

Source: Reuters

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Economic

Diversification From U.S. Equities Drives Inflows

Foreign investors have extended their buying of Japanese stocks for a 13th straight week through June 27, according to Japan Exchange Group data, marking the longest uninterrupted accumulation since the early days of Abenomics in 2013. During the latest reporting week alone, foreign net purchases reached ¥339.8 billion (approximately $2.36 billion), reinforcing a strong and sustained interest in Japanese equities despite ongoing global uncertainty.

Analysts attribute this streak to a strategic rotation out of U.S. equities, with investors seeking to rebalance portfolios heavily concentrated in American assets following Wall Street’s recent strength. Shuji Hosoi, senior strategist at Daiwa Securities, noted that this diversification trend may continue for about a year, reflecting both tactical repositioning and longer-term global allocation shifts.

Historical Parallels With Abenomics But Lacking Euphoria

The last comparable run occurred from November 2012 to March 2013, when foreign investors poured ¥5.7 trillion into Japanese stocks, spurred by aggressive monetary and fiscal reforms under Prime Minister Shinzo Abe’s Abenomics agenda. While the current rally lacks a comparable policy-driven catalyst, it underscores Japan’s appeal as a relatively undervalued and structurally stable market in a volatile global investment environment.

This time, however, sentiment appears more measured. Kohei Onishi of MUFG Morgan Stanley suggests that unlike the investor enthusiasm seen during Abenomics, today’s momentum is not fueled by optimism about transformative domestic policy. Instead, it reflects Japan's perceived resilience, low political risk, and strong corporate governance reforms that have slowly built confidence over recent years.

Market Impact Evident in Topix Gains

The surge in foreign buying has coincided with upward movement in the Topix index, which reached a high of 2869.07 on Monday, nearing its record of 2946.60 set in July 2024. This suggests that foreign flows are providing notable support to the broader market, even as domestic consumption remains sluggish and global concerns — especially around renewed U.S. trade tariffs — reemerge.

However, the recent upswing has started to lose steam, with analysts noting that tariff fears continue to cast a shadow over export-sensitive sectors. The sustainability of the rally may now depend on how much further foreign investors are willing to increase exposure without additional structural catalysts.

Caution Ahead as July Approaches

While the current streak reflects confidence in Japanese equity fundamentals, the absence of a bold fiscal or monetary narrative — like that seen in 2013 — means the rally may be vulnerable to a shift in sentiment. Onishi cautions that July could see a slowdown in foreign inflows, particularly if market volatility intensifies or if global rate expectations shift unexpectedly.

Moreover, given the scale of the recent buying and a relatively high valuation compared to recent years, investors may begin to lock in profits or rotate into other Asian markets offering more aggressive growth stories or stimulus-driven upside.

The 13-week streak of foreign purchases in Japanese stocks highlights growing interest in Japan as a diversification play amid global market recalibrations. While reminiscent of the enthusiasm seen during Abenomics, today’s rally is marked by caution rather than euphoria. With global risks lingering and no fresh domestic policy surprises expected, the coming weeks will test whether Japan can sustain this inflow momentum or if investor attention will begin to shift once again.

Source: Bloomberg

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Glendon

Economic

Forex

Political

Global attention turned to Vietnam on Thursday, after U.S. President Donald Trump announced a trade deal with Hanoi just days before Washington's reciprocal tariffs come back in full force.

Under the agreement, the U.S. will apply a 20% duty on Vietnamese imports — sharply below the 46% rate Trump had imposed in early April. U.S. imports to Vietnam will meanwhile not be subject to tariffs.

Trump also said that Vietnam had agreed to a 40% duty on any products that originally came from another country, but were sent to Vietnam for final shipment to the U.S. China has reportedly repeatedly relied on this practice, known as transshipping, to avoid trade barriers.

Trump says U.S. struck trade deal with Vietnam that imposes 20% tariff on its imports

Vietnam is one of the few countries that has struck a trade deal with the White House, while the clock ticks down on Trump's 90-day temporary reprieve. Many nations have been left wondering how the future of their trade relationship with the world's largest economy could shape up.

"What we learned from the Vietnam deal is, if anything, the tariffs are going to go up from here, not down," Sebastian Raedler, head of European equity strategy at BofA, told CNBC's "Europe Early Edition" on Thursday.

More emerging market deals ahead?

The deal could be cause for concern for other emerging market economies like Vietnam, economists and strategists at Citi said in a note Thursday.

"On balance, we believe there is more for EM Asia to worry about than expect gains if this deal reflects what is to come soon," they noted.

While the development removes uncertainty and suggests other agreements could emerge in the coming days, the 20% tariff rate is higher than the expected 10% levy on goods, according to Citi's experts. They add that the separate 40% rate on transshipped goods suggests other countries may also need to agree to such a duty.

"Thailand followed by Malaysia might be more exposed than other EM Asia peers (apart from Vietnam). A separate and more punitive tariff on transshipped goods was least expected by the market," the note said.

"Additionally, there may be spillovers to other exporters that have set up factories in Vietnam in past years," for example Korea, it added.

What the deal could mean for Europe

While the Vietnam-U.S. deal suggests more deals likely lie ahead for other Asian countries, it does not necessarily mean that the same is true for the European Union, Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank, told CNBC.

These are the sticking points holding up a U.S.-EU trade deal

"The Vietnamese authorities have been clear about their intent to negotiate with the US, even before the reciprocal announcements were made in April," she said by email, adding that the same was true for other regional economies like Indonesia and Malaysia.

"Compared to these economies, the case with [the] EU has not always been smooth sailing and the US has been more public in its criticism of the EU at different times in the past few months," Venkateswaran said.

A bare-bones deal is Europe's best hope in trade talks with the U.S., sources say

Trade negotiations between the EU and U.S. have been challenging and slow to develop, with sources telling CNBC that a bare-bones "political" deal with scant initial details may be the the EU's best hope at this point. Analysts and economists have also expressed uncertainty about the likelihood of a trade agreement, given key sticking points like big tech regulation, taxation, and broadly mismatched world views.

Trump has called for tariffs as high as 50% on the EU, while the bloc has threatened wide-ranging countermeasures, which have also been paused until next week.

Source: CNBC

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Economic

Investor Reassurance Brings Relief After Sharp Selloff

UK financial markets reversed course on Thursday following Prime Minister Keir Starmer’s emphatic backing of Chancellor of the Exchequer Rachel Reeves. His public affirmation, delivered in multiple media appearances, came after a sharp selloff triggered by his earlier hesitation to confirm her tenure during a parliamentary session. The swift rebound in gilts, equities, and sterling reflected a partial restoration of investor confidence.

Yields on 30-year gilts dropped by 12 basis points to 5.30%, reversing much of the previous session’s 19 basis point spike—the largest single-day jump since April. The 10-year gilt yield also retreated, falling nine basis points to 4.52%. Meanwhile, the pound strengthened slightly to $1.3656, recovering from a steep 0.8% decline on Wednesday. The FTSE 250 Index, focused on domestic businesses, climbed 0.5%, signaling that market sentiment had stabilized.

Political Clarity Calms Fiscal Anxiety

Markets had reacted negatively to the perception of instability within the UK’s economic leadership, fearing that a potential replacement for Reeves might loosen fiscal discipline. Her reputation for adhering to self-imposed spending constraints had helped anchor investor expectations during a period of rising debt sensitivity. The abrupt prospect of her departure—amplified by recent political pressure that forced the government to cancel £5 billion in planned welfare cuts—heightened concerns that fiscal credibility might erode.

In a BBC interview late Wednesday and follow-up comments to UK radio on Thursday, Starmer sought to restore confidence. “She and I work together, we think together... We’re in lockstep,” he said, reinforcing the message that Reeves remains central to his economic agenda. His intervention successfully cooled speculation, reaffirming to markets that sudden fiscal policy shifts are unlikely.

Comparisons to 2022 Crisis Surface but Remain Contained

The rapidity of the market's reaction, and the scale of the bond yield movements, recalled echoes of the 2022 UK crisis under former Prime Minister Liz Truss. However, most analysts stopped short of drawing direct parallels. Laurence Mutkin of Bank of Montreal noted that while uncertainty is elevated, the welfare spending reversal is minor in absolute fiscal terms. He added that market disorder is unlikely unless gilt yields approach their 2025 peak of 4.88%, a threshold not yet breached.

Nonetheless, traders have begun embedding a risk premium into UK assets. According to Bloomberg’s macro strategist Ven Ram, this premium may not fully unwind even with Reeves’ continued leadership, as fiscal pressures persist and political fragility remains visible. The market’s relief rally is thus conditional and could prove temporary if further policy volatility or economic missteps arise.

Global Spillover and Broader Yield Implications

The UK’s bond market turbulence extended into U.S. Treasuries on Wednesday, underlining the global interconnectedness of fiscal risk. With the U.S. also facing its own fiscal scrutiny due to President Donald Trump’s advancing tax and spending package, investors are increasingly alert to the implications of public debt levels in both economies. On Thursday, U.S. 10-year yields fell two basis points to 4.26%, mirroring the partial recovery in gilts.

The synchronous bond market movements reflect a broader theme: long-duration sovereign debt remains acutely sensitive to political clarity, fiscal messaging, and central bank policy shifts. Market reactions are increasingly immediate and pronounced, as investors reassess the sustainability of debt issuance in high-rate environments.

While Prime Minister Starmer’s public support for Rachel Reeves has temporarily reassured markets, the episode highlights the heightened scrutiny facing fiscal policy in developed economies. Investors remain focused on the credibility of budget plans and the durability of leadership, particularly in an environment where sovereign borrowing needs are rising. For the UK, the bounce in gilts and the pound offers a reprieve—but not a guarantee of longer-term stability. Markets will continue to demand disciplined policy signals and cohesive political leadership to sustain confidence.