USTR Eases Proposed Penalties, Fees for non-US LNG tankers, Vehicle Carriers

Commodity

China–U.S. Trade War

Summary:

The revised proposal, unveiled by USTR on Friday, would remove LNG-related penalties for failing to export a percentage of fuel on U.S.-owned ships.

The U.S. Trade Representative softened fee proposals for non-U.S.-built LNG tankers and car carriers amid its ongoing effort to counter China's dominance on the high seas and revive domestic shipbuilding.

The revised proposal, unveiled by USTR on Friday, would remove LNG-related penalties for failing to export a percentage of fuel on U.S.-owned ships. It also would reduce fees when foreign-built car carriers visit domestic ports and exempt those vessels when they are serving the U.S. military.

USTR previously exempted ships carrying U.S. exports as well as operators of smaller ships from port fees originally aimed at China-linked vessels. The agency also exempted vessels that service the Great Lakes, Caribbean and U.S. territories.

"This is a step in the right direction, and we look forward to working with USTR on a solution that ensures U.S. LNG remains competitive on the global stage," Rob Jennings, vice president of natural gas markets for the American Petroleum Institute, said on Monday.

USTR caught the liquified natural gas industry off guard in April with new rules for outbound shipments of that fuel, sparking an outcry.

It also surprised the vehicle carrier industry with a plan to impose port fees on all non-U.S.-built vessels in that segment - including U.S.-flagged and U.S.-crewed ships admitted to the U.S. Maritime Security Program (MSP) that supports Washington's military readiness.

USTR on Friday removed language saying it could suspend LNG export licenses until its rules for moving a percentage of outgoing shipments on U.S.-built and operated vessels were met.

On April 17, USTR said LNG producers would have to transport 1% of their exports on U.S.-built ships starting in April 2029. That percentage would escalate to 15% in April 2047 and beyond.

The World Shipping Council, whose members vehicle carriers such as Norway's Wallenius Wilhelmsen, did not immediately comment on the revisions.

The vehicle carrier fee effective October 14 was to be $150 per car capacity of a non-U.S.-built ship known as roll-on/roll-offs, or RoRos. Typical RoRos have capacity to carry nearly 5,000 vehicles.

In the revision, USTR lowered that fee to $14 per net ton. It also exempted vessels in the MSP, as well as U.S. government cargo - matching previous exemptions made for other vessel segments.

Companies with ships in the MSP include Florida-based American Roll-On, Roll-Off Carrier Group, a U.S.-flag operator of vehicle carriers that is part of Wallenius Wilhelmsen Group, which did not immediately comment.

The RoRo fees come on top of steep, 25% fees on auto imports imposed by Trump. These affect mainly European vehicles. U.S. exporters also use RoRos to export U.S.-made BMW SUVs, John Deere tractors and other goods.

Shipping industry groups and attorneys have said USTR overreached by levying fees on RoRos made in countries that were not part of the Biden administration's fast-track investigation into China.

The USTR's revisions continued to reference "non-U.S. built" vehicle carriers.

Interested parties, which were not previously given the opportunity to comment on rules for RoRos or LNG tankers, have until July 7 to submit feedback on the revisions.

Source: Reuters

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Olivia Brooks

Political

China–U.S. Trade War

Trade talks between the US and China will continue into a second day, according to a US official, as the two sides look to ease tensions over shipments of technology and rare earth elements.

Representatives for both nations ended their first day of negotiations in London after more than six hours of discussions at Lancaster House, a 19th century mansion near Buckingham Palace. The talks concluded around 8 p.m. London time. The advisers will meet again Tuesday at 10 a.m. in the British capital, the official said.

The US delegation was led by Treasury Secretary Scott Bessent, with Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer. The presence of Lutnick, the former Cantor Fitzgerald CEO, underscored the importance that export controls are playing in these discussions.

The Chinese delegation was led by Vice Premier He Lifeng.

The US signaled a willingness to remove restrictions on some tech exports in exchange for assurances that China is easing limits on rare earth shipments, which are critical to a wide array of energy, defense and technology products, including smartphones, fighter jets and nuclear reactor rods. China accounts for almost 70% of the world’s production of rare earths.

Specifically, the Trump administration is prepared to remove a recent spate of measures targeting chip design software, jet engine parts, chemicals and nuclear materials, people familiar with the matter said. Many of those actions were taken in the past few weeks as tensions flared between the US and China.

The Trump administration expects that “after the handshake” in London, “any export controls from the US will be eased and the rare earths will be released in volume” by China, Kevin Hassett, head of the White House’s National Economic Council, told CNBC earlier in the day Monday.

Hassett’s comments from Washington were the clearest signal yet that the US is willing to offer such a concession, though he added that the US would stop short of including the most sophisticated chips made by Nvidia Corp. used to power artificial intelligence.

“The very, very high-end Nvidia stuff is not what I’m talking about,” Hassett said, adding that restrictions would not be lifted on the Nvidia H2O chips that are used to train AI services. “I’m talking about possible export controls on other semiconductors which are also very important to them.”

Chinese shares trading in Hong Kong entered a bull market, as some investors expressed hope the talks signaled a cooling of trade tensions. In the US, traders drove stocks higher, with the S&P 500 within 2% of its February peak.

The first round of negotiations since delegations from the countries met a month ago is aimed at restoring confidence that both sides are living up to commitments made in Geneva. During those discussions, Washington and Beijing agreed to lower crippling tariffs for 90 days to allow time to address a trade imbalance that the Trump administration blames on an unfair playing field.

A phone call last week between President Donald Trump and his counterpart Xi Jinping appeared to give fresh momentum to reaching a deal. US-China trade tensions escalated this year as Trump hiked duties on Chinese goods, prompting retaliation from Beijing. That’s led to pain in both economies, including uncertainties for businesses trying to navigate sudden changes in trade policy.

Source: Bloomberg Europe

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Manuel

Middle East Situation

Political

Iran said on Monday it will soon hand a counter-proposal for a nuclear deal to the United States in response to a U.S. offer that Tehran deems "unacceptable," while U.S. President Donald Trump said talks would continue.

Trump made clear that the two sides remained at odds over whether the country would be allowed to continue enriching uranium on Iranian soil.

"They're just asking for things that you can't do. They don't want to give up what they have to give up," Trump told reporters at the White House. "They seek enrichment. We can't have enrichment."

Earlier, Iranian foreign ministry spokesperson Esmaeil Baghaei said Tehran was preparing a counter-offer to the U.S. proposal that was presented in late May. He said there was not yet any detail about the timing of a sixth round of talks.

While Trump said the next round of talks would take place on Thursday, a senior Iranian official and a U.S. official said Thursday was unlikely.

The U.S. official said the talks, led by U.S. special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi, could be on Friday or Sunday, possibly in Oman or Oslo.

"The U.S. proposal is not acceptable to us. It was not the result of previous rounds of negotiations. We will present our own proposal to the other side via Oman after it is finalised. This proposal is reasonable, logical, and balanced," Baghaei said.

"We must ensure before the lifting of sanctions that Iran will effectively benefit economically and that its banking and trade relations with other countries will return to normal."

Reuters previously reported that Tehran was drafting a negative response to the U.S. proposal. An Iranian diplomat said the U.S. offer failed to resolve differences over uranium enrichment on Iranian soil, the shipment abroad of Iran's entire stockpile of highly enriched uranium and reliable steps to lift U.S. sanctions.

Last week, Supreme Leader Ayatollah Ali Khamenei dismissed the U.S. proposal as against Iran's interests, pledging to continue enrichment on Iranian soil, which Western powers view as a potential pathway to building nuclear weapons. Iran says its nuclear programme is only for peaceful purposes.

Trump said Iran was the main topic of a phone conversation he had on Monday with Israeli Prime Minister Benjamin Netanyahu.

Netanyahu's office said the president had told him talks with Iran would continue at the end of the week.

During his first term in 2018, U.S. President Donald Trump ditched a 2015 nuclear pact between Iran and six powers and reimposed sanctions that have crippled Iran's economy. Iran responded by escalating enrichment far beyond that pact's limits.

Iran says the West has turned a blind eye to Israel's nuclear programme even while pushing against Iran's. Israel neither confirms nor denies that it has nuclear weapons.

Baghaei said sensitive Israeli documents, which Iran has previously promised to unveil, would demonstrate "that parties constantly questioning Iran's peaceful nuclear programme actively work to strengthen Israel's military nuclear programme".

The negotiating parties should not allow Israel to disrupt diplomatic processes, he added.

Source: Reuters

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Manuel

Cryptocurrency

BlackRock’s iShares Bitcoin Trust (IBIT) exchange-traded fund (ETF) crossed $70 billion in assets under management (AUM) on June 6, being the fastest to reach this mark in just 341 trading days.

Bloomberg ETF analyst Eric Balchunas reported the milestone on X, noting that the fund beat the previous speed record of 1,691 days set by the SPDR Gold Shares ETF (GLD) by five times.

Fastest path to $70 billion

In addition to speed, IBIT’s dominance also shines among other spot Bitcoin (BTC) ETFs.

According to Bitcoin Treasuries data, the BlackRock fund commands more than triple the next-largest vehicle, Fidelity’s Wise Origin Bitcoin Trust (FBTC), with $21.3 billion under management.

Furthermore, it dwarfs Ark 21shares’ ARKB and Bitwise’s BITB, with their $4.6 billion and $3.9 billion under management, respectively. Grayscale’s legacy GBTC fund remains sizeable at $19.3 billion, but it is still more than three times smaller than IBIT.

IBIT holds about 662,707 BTC, nearly 20% of the 3,404,140 BTC which is custodied on behalf of public companies, private companies, governments, exchanges, and DeFi smart contracts.

Fresh firepower

However, IBIT’s dominance among institutional Bitcoin holders might be threatened as interest extends beyond ETFs and suggests distribution over BTC’s supply in the next few years.

VanEck’s head of digital assets research, Matthew Sigel, shared data from Wells Fargo on June 9 that six publicly traded firms collectively hold or plan to raise up to $76 billion for potential Bitcoin purchases.

The companies include Strategy, Twenty One Capital, Strive, Semler Scientific, Nakamoto Corp., and Trump Media and Technology Group.

Sigel highlighted that the pool equals 56% of the spot Bitcoin ETF complex’s current assets under management and 16% of the net ETF inflows accumulated over the past 16 months.

IBIT’s rapid ascent to $70 billion cements the spot Bitcoin ETFs as the dominant gateway for institutional exposure, while parallel corporate capital raises point to deeper supply consolidation in the months ahead.

Source: Cryptoslate

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Manuel

Central Bank

Economic

These days, waiting for the Federal Reserve to lower its benchmark interest rate is a bit like waiting for Godot: the arrival date for the long-anticipated monetary policy move keeps getting pushed into the future.

Financial markets scaled back their expectations for rate cuts again last week after a report on job growth showed the labor market staying unexpectedly healthy in May. The labor market's resilience takes some pressure off the Federal Reserve to cut interest rates to boost the economy and prevent a severe increase in unemployment.

On Monday, investors seemed sure that the jobs report indicated the central bank would not cut the federal funds rate soon, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data. Investors were pricing in an 83% chance the Fed's policy committee would hold its rates steady in the June and July meetings. That's up from 76% a week ago and 40% a month ago.

Fed officials themselves have indicated they're in no hurry to chop interest rates, which would put downward pressure on interest rates on all kinds of loans. In contrast, President Donald Trump has repeatedly demanded the Fed cut rates: he's asked officials to lower rates by an entire percentage point, rather than their usual quarter-point increments, and criticized the central bank for not cutting rates sooner.

The outlook for interest rates has changed dramatically since late 2024 when Fed officials went on a rate-cutting spree, lowering the key fed funds rate a percentage point over three meetings.

In January, the Fed declined to cut rates again, leaving them high enough to be deemed "restrictive. " This means borrowing costs are high enough to drag on the economy and downwardly affect inflation. Fed officials have held off on more rate cuts out of fear that the tariffs Trump has imposed this year could push up prices and set off a fresh round of inflation.

Since then, expectations for when rate cuts could resume have been on a roller coaster ride as financial markets and forecasters try to predict the outcome of the trade war: if tariffs drag down the job market enough to threaten a wave of mass layoffs, the Fed could step in and cut rates to help the economy. But if inflation remains above the Fed's target of a 2% annual rate, the Fed could keep rates higher for longer to force it down.

Some economists predict the Fed will be forced to cut sooner rather than later. Economists at Pantheon Macroeconomics, for instance, downplayed the significance of the healthy job growth figures in May, noting that recent jobs reports have been heavily revised downward. The Bureau of Labor Statistics regularly revises its monthly jobs reports as new survey data comes in. The May jobs report downwardly revised job growth for the previous two months by 95,000, for instance.

"Mr. Trump’s criticism of the Fed’s current stasis will likely be proven right," economists led by Samuel Tombs, chief U.S. economist at Pantheon, wrote in a commentary.

Pantheon expects the Fed to make three quarter-point cuts before the end of the year as the job market unravels.

At the other end of the spectrum are forecasters at Deutsche Bank, who expect the Fed to hold off on rate cuts until December and make just one cut in 2025. DB's economists, using a proprietary AI tool, said speeches by Fed officials have become more "hawkish" lately, suggesting policymakers are more concerned with fighting inflation than they are with saving jobs.

Source: Investopedia

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Manuel

Economic

Political

Senate Republicans intend to propose revised tax and health-care provisions to President Donald Trump’s $3 trillion signature economic package this week, shrugging off condemnations of the legislation by Elon Musk as they rush to enact it before July 4.

The Senate Finance Committee’s plan to extract savings from the Medicaid and — perhaps — Medicare health insurance programs could depart in key respects from the version of the giant bill that narrowly passed the US House in May. The release of the panel’s draft will likely touch off a new round of wrangling between fiscal conservatives and moderates.

Businesses in the energy, health care, manufacturing and financial services industries will be watching closely as the week progresses. Key members of Congress and Trump officials charged with shepherding the tax bill are slated to meet on Thursday to discuss the bill, according to a White House official.

SALT Dilemma

A crucial decision for Majority Leader John Thune, Committee Chairman Mike Crapo and other panel members will be how to handle the $40,000 limit on state and local tax deductions that was crucial to passage of the bill in the House.

Senate Republicans want to scale back the $350 billion cost of increasing the cap from $10,000 to $40,000 for those making less than $500,000.

House Speaker Mike Johnson and a group of Republican members from high-tax states have warned that any diminishing of the SALT cap would doom the measure when it comes back to the House for a final vote. At the same time, so-called pass-through businesses in the service sector are pushing to remove a provision in the House bill that limits their ability to claim SALT deductions.

The Senate Finance Committee is widely expected to propose extending three business tax breaks that expire after 2029 in the House version to order to make them permanent. They are the research and development deduction, the ability to use depreciation and amortization as the basis for interest expensing and 100% bonus depreciation of certain property, including most machinery and factories.

Manufacturers and banks are particularly eager to see all of them extended.

To pay for the items, which most economists rank as the most pro-growth in the overall tax bill, senators may restrict temporary breaks on tips and overtime, which Trump campaigned on during last year’s election in appeals to restaurant and hospitality workers. The White House wants to keep those provisions as is.

White House economic adviser Kevin Hassett said Trump “supports changing” the SALT deduction and it’s up to lawmakers to reach a consensus.

“It’s a horse trading issue with the Senate and the House,” Hassett said Sunday on CBS’s Face the Nation. “The one thing we need and the president wants is a bill that passes, and passes on the Fourth of July.”

The committee will also face tough decisions on green energy tax credits. Scaling those back generates nearly $600 billion in savings in the House bill.

On Friday, rival House factions released dueling statements.

The conservative House Freedom Caucus warned that any move to restore some of the credits would prompt its members to vote against the bill.

“We want to be crystal clear: If the Senate attempts to water down, strip out, or walk back the hard-fought spending reductions and IRA Green New Scam rollbacks achieved in this legislation, we will not accept it,” the group said.

In contrast, a group of 13 Republican moderates, led by Pennsylvania’s Brian Fitzpatrick and Virginia’s Jen Kiggans, urged senators to make changes that would benefit renewable energy projects, many in Republican districts, that came about through President Joe Biden’s Inflation Reduction Act.

“We remain deeply concerned by several provisions, including those which would abruptly terminate several credits just 60 days after enactment for projects that have not yet begun construction,” the lawmakers said in a letter to the Senate.

Banks are especially interested to ensure that tax credits on their balance sheets as part of renewable energy financing aren’t rendered worthless by the bill.

Health-Care Perils

Medicaid and Medicare cuts present the most daunting challenge in the committee’s draft. While Republicans are generally in favor of new work requirements for able-bodied adults to be insured by Medicaid, some moderates like Senator Lisa Murkowski of Alaska have expressed concern over giving states just a year and a half to implement the requirement.

House provisions instituting new co-pays for Medicaid recipients and limits on the ability of states to tax Medicaid providers in order to increase federal reimbursement payments are more disputed.

Senators Josh Hawley of Missouri and Jim Justice of West Virginia have said they oppose these changes.

To find savings to make up for removing these provisions, Republicans said last week that they are examining whether to put new restrictions on billing practices in Medicare Advantage. Large health insurers that provide those plans would be most affected by such changes.

Yet overall, GOP leaders say the tax bill remains on schedule and they expect much of the House bill to remain intact.

The Senate’s rules-keeper is in the process of deciding whether some provisions are not primarily fiscal in nature. Provisions that restrict state regulations on artificial intelligence, ending some gun regulations and putting new limits on federal courts are seen as most vulnerable to being stripped under Senate budget rules.

Lawmakers are largely taking their cues from Trump and sticking by the $3 trillion bill at the center of the White House’s economic agenda.

Musk, the biggest political donor of the 2024 campaign, has threatened to help defeat anyone who votes for the legislation, but lawmakers seem to agree that staying in the president’s good graces is the safer path to political survival.

“We are already pretty far down the trail,” Thune told reporters on Thursday afternoon as his colleagues left for the weekend.

Source: Bloomberg

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Manuel

Bond

Economic

U.S. Treasury auctions of notes and bonds this week are even more in focus than usual as tests of market sentiment on U.S. assets, and while investors look like keen buyers of short and medium-term debt, appetite at the long end is more dicey.

These once-routine auctions have become a focus for investors as a gauge of demand, both foreign and domestic, with the July 9 deadline for the 90-day pause on reciprocal tariffs fast approaching.

Aside from bills, the U.S. Treasury will sell a total of $119 billion in three- and 10-year notes, as well as 30-year bonds. The latter will be closely watched for signs that bond investors are putting their foot down and rejecting countries with huge fiscal deficits and mountains of debt.

"We are now in an environment where investors are looking at...demand that could be dropping at a time when supply seems to be on the precipice of rising further," said Zachary Griffiths, head of investment grade and macro strategy at CreditSights in Charlotte.

Bond vigilantes, seemingly back with a vengeance, have questioned fiscal profligacy around the world amid concerns U.S. President Donald Trump's trade war and tax cuts will fuel inflation, while the tariffs will additionally curb global growth and force governments to spend more.

At the same time, last month's U.S. credit rating downgrade by Moody's is a stark reminder that the world's largest economy is courting disaster with a $36 trillion debt pile.

On Tuesday, the Treasury will sell $58 billion in three-year notes, followed by $39 billion in 10-year debt on Wednesday, and $22 billion in 30-year bonds on Thursday. Overall, analysts expect these auctions to go smoothly.

"The trend in these auctions has been reassuring so far," said Guneet Dhingra, head of U.S. rates strategy at BNP Paribas, in New York. "Largely the auction numbers suggest that there has been no meaningful dent in both foreign and domestic demand."

Last month's three-year note auction showed solid results. Indirect bids, which include foreign central banks, took in 62% of the total issuance, lower than April's numbers, but roughly in line with the average for the last 12 auctions.

Offshore investors, particularly foreign official buyers, typically gravitate toward shorter-term Treasuries, specifically those with maturities of less than five years, according to the latest U.S. Treasury survey.

Jay Barry, head of global rates strategy at J.P. Morgan, wrote in a research note that foreign official institutions' focus on the front end suggested that any rotation away from Treasuries "could be realized through letting holdings run off and not reinvesting, rather than selling securities outright."

US 10-YEAR SUPPLY VS CPI

In the case of the 10-year note auction on Wednesday, the outcome is a little trickier to forecast, analysts said, given that it comes on the same day as the release of the U.S. consumer price index data. However, based on auction statistics, there will be no shortage of buyers for the 10-year, analysts said.

Last month's 10-year auction showed a sturdy outcome. Indirect bids took in about 76% of the total issue, higher than the 12-auction average of 72%.

"The primary driver of a buyer's strike was thought to be the trade war and stepping back from the Treasury market," Ben Jeffery, vice president, interest rates trading, at BMO Capital Markets, said in a podcast on Friday.

"Now...the opposite argument might be true, and that is: why would one preemptively pull back from the Treasury market, rather than demonstrate ongoing sponsorship for Treasuries as a negotiating tool? We have yet to see any clear evidence of foreign sponsorship pulling back from Treasuries."

The U.S. 30-year bond auction, meanwhile, could go either way and some analysts said they would not be surprised if it comes out weaker than expected given the spate of poor long-dated sales globally. That has led to the surge in yields on the back end, particularly U.S. 30-year bonds, which hit 5.16% last month, the highest since October 2023.

"The 30-year is the poster child for all the market's fiscal concerns," said BNP's Dhingra. "But if you look at the statistics available until April, you can see that the 30-year bond auction numbers have seen pretty stable demand from dealers."

But last month's 30-year auction was not well-received, picking up a yield that was higher than the expected rate at the bid deadline, suggesting investors demanded a premium to purchase the bond. Indirect bids were marginally lower than the 12-auction average. The 30-year bond also did not fare well at the April auction.

"Demand from foreign investors for 30-year bonds has probably plateaued," said CreditSights' Griffiths.