US-EU Rivalry Escalates, with Japan and South Korea as the First Targets

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Summary:

US plans to extend suspension period for so-called reciprocal tariffs; The EU is striving to reach a framework trade agreement with the US this week; Japan and South Korea become Trump's first targets for unilateral tariffs, with both countries facing a 25% tariff rate starting in August…

[Quick Facts]

1. US plans to extend suspension period for so-called reciprocal tariffs

2. Trump sends letters to 14 countries regarding the latest tariffs

3. The EU is striving to reach a framework trade agreement with the US this week

4. Russia's crude oil production in June widened the gap with OPEC+ quotas, with production discipline significantly improving

5. Trump: Open to lifting sanctions on Iran at the right time

6. The US has proposed a 10% tariff agreement to the EU, but with conditions attached

7. Japan and South Korea become Trump's first targets for unilateral tariffs, with both countries facing a 25% tariff rate starting in August

[News Details]

US plans to extend suspension period for so-called reciprocal tariffs

The White House Press Secretary, Leavitt, confirmed during a routine press briefing on July 7th that U.S. President Trump intends to sign an executive order extending the so-called "reciprocal tariffs" suspension for an additional 90 days, delaying the implementation from July 9th to August 1st. On the same day, Trump publicly posted letters on his social media platform, "Real Social," addressed to leaders of 13 countries regarding tariff increases, announcing that starting August 1st, imports from Japan, South Korea, Malaysia, Kazakhstan, South Africa, Laos, Myanmar, Indonesia, Bosnia and Herzegovina, Bangladesh, Serbia, Cambodia, and Thailand will be subject to tariffs ranging from 25% to 40%. On April 2nd, Trump announced the imposition of these "reciprocal tariffs," triggering a sharp decline in U.S. financial markets. Under mounting pressure, he subsequently announced on April 9th a 90-day suspension of high tariffs on certain trade partners, maintaining a baseline tariff rate of 10%.

Trump sends letters to 14 countries regarding the latest tariffs

Starting from the early hours of July 8th Beijing time, Trump has consecutively announced via social media the issuance of tariff notices directed at multiple nations, issuing updated tariff rate threats to 14 countries. Japan, South Korea, Kazakhstan, Malaysia, and Tunisia face proposed tariffs of 25%; South Africa and Bosnia are targeted with 30% tariffs; Indonesia at 32%; Bangladesh and Serbia at 35%; Thailand and Cambodia at 36%; and Laos and Myanmar at 40%. These tariffs are scheduled to take effect on August 1st.

The EU is striving to reach a framework trade agreement with the US this week

The EU is seeking to reach a preliminary trade agreement with the US this week, aiming to secure a 10% tariff rate beyond the August 1st deadline while negotiating a long-term accord. Sources indicate that the EU is advocating for the exclusion of certain critical commodities from the tariff, including aircraft, aircraft components, wine, and spirits. The tentative agreement is expected to include some form of tariff exemption or reduction. The European Commission, responsible for EU trade affairs, briefed member states on the negotiation progress on Monday. A Commission spokesperson declined to comment on the ongoing negotiations.

Russia's crude oil production in June widened the gap with OPEC+ quotas, with production discipline significantly improving

Data indicates that Russia's average daily crude oil production in June was 9.022 million barrels, 28,000 barrels below the country's mandated production target for the month. This represents the largest discrepancy between actual output and quota for Russia this year. As a leading member of OPEC+ alongside Saudi Arabia, Russia has shown improvement in implementing production cut agreements in recent years, having previously faced criticism for prolonged non-compliance with quotas. Statistics reveal that for most of this year, Russia's actual production has remained below the prescribed levels. This shift also underscores Russia's increased emphasis on adhering to production discipline, particularly following criticism from Saudi Arabia.

Trump: Open to lifting sanctions on Iran at the right time

U.S. President Trump stated on Monday his willingness to lift stringent sanctions against Iran at an appropriate juncture. Prior to dinner with Israeli Prime Minister Netanyahu, Trump told reporters that recent U.S. sanctions relief on Syria would facilitate its progress, and he expressed hope for similar measures toward Iran. He emphasized the desire to remove these sanctions when suitable, providing Iran an opportunity for reconstruction, as he advocates for Iran's peaceful self-renewal. Trump also announced that the U.S. has scheduled Iran negotiations, with the date and time to be disclosed on the 8th. U.S. Special Envoy for Middle East Affairs Witkoff indicated that the Iran issue conference is expected to be held around next week.

The US has proposed a 10% tariff agreement to the EU, but with conditions attached

An EU diplomat and an EU official indicated that the US has proposed an agreement to the European Union, maintaining a 10% baseline tariff on all EU goods, excluding sensitive sectors such as aerospace and spirits. The diplomats emphasized that the framework of the trade agreement remains largely a dynamic and evolving target, with any accord requiring approval from the Trump administration to proceed. Washington has not indicated any plans to exempt politically sensitive industries such as automotive, steel, aluminum, or pharmaceuticals in accordance with EU requests. However, France, Italy, and Ireland may welcome tariff exemptions for spirits and aircraft.

Japan and South Korea become Trump's first targets for unilateral tariffs, with both countries facing a 25% tariff rate starting in August

The U.S. President Donald Trump has initiated unilateral tariffs on nations that have not yet reached trade agreements with the United States, announcing a 25% tariff on imports from Japan and South Korea effective August 1. Trump previously indicated he would release a series of correspondence and trade agreements on Monday, with these two Asian countries being the primary focus. During his second term, Trump is eager to reform U.S. trade policy, which has introduced ongoing uncertainty and challenges for markets, central banks, and corporate executives worldwide. On his Truth Social platform, Trump publicly shared letters addressed to Japanese and South Korean leaders, with the announced tariff rates aligning closely with his prior statements—initially proposing a 24% tariff for Japan and 25% for South Korea in early April. Shortly thereafter, Trump announced a 90-day suspension period to facilitate negotiations, during which tariffs were temporarily reduced to 10%.

[Today's Focus]

UTC+8 12:30 RBA July Interest Rate Decision

UTC+8 13:30 RBA Governor Bullock Holds Monetary Policy Press Conference

UTC+8 22:00 ECB Governing Council Member Nagel Speaks

UTC+8 00:00 EIA Releases Monthly Short-Term Energy Outlook

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Economic

Forex

Yen Tumbles Amid Escalation in US-Asia Trade Tensions

The Japanese yen fell sharply on Tuesday as financial markets digested President Donald Trump’s latest move in his ongoing trade confrontation this time targeting key US allies. Trump announced that goods from Japan and South Korea would be subject to 25% tariffs starting August 1, sending ripples through currency and risk-sensitive asset markets.

The yen dropped nearly 1% overnight, reaching 146.44 per dollar in early Tuesday trading its weakest level in two weeks while the South Korean won also lost ground, although it later reversed slightly. The tariff announcement was not entirely unexpected but caught investors off-guard in its scope and timing, reigniting fears about global supply chain disruptions and retaliatory actions.

Currency Markets Reflect Risk-Off Sentiment

The yen’s depreciation is notable given its traditional role as a safe-haven asset during times of global uncertainty. The currency’s underperformance in response to direct trade penalties highlights a shift in investor behavior where fundamental trade risks now outweigh the yen’s protective status.

According to Carol Kong, currency strategist at the Commonwealth Bank of Australia, uncertainty around the ultimate shape of Trump’s tariff policy is likely to continue rattling sentiment. With countries uncertain about final rates or exemptions, global markets are positioned defensively, and volatility remains elevated.

South Korea and Japan have both responded diplomatically. Prime Minister Shigeru Ishiba confirmed that Japan would continue negotiations in pursuit of a mutually beneficial trade deal, while South Korea emphasized that it views the new deadline as an extension of a “grace period,” suggesting room for further dialogue.

Dollar Holds Firm, While Other Majors Stabilize

In contrast to the yen and won, other major currencies saw moderate recoveries on Tuesday. The euro rebounded 0.27% to $1.1741 after a sharp decline the previous day, while the British pound rose 0.17% to $1.3626. Both currencies were supported by expectations that the European Union may avoid inclusion in Trump’s baseline 10% tariff scheme, according to unnamed EU officials.

The US dollar index remained stable at 97.40, consolidating gains from Monday when it rose 0.5% amid renewed demand for dollar liquidity during market stress. The Australian and New Zealand dollars, which had sold off heavily at the start of the week, also clawed back some ground, rising 0.32% and 0.22%, respectively.

Monetary Policy Outlook Remains a Key Driver in Asia-Pacific

Attention now turns to the Reserve Bank of Australia, which is expected to deliver another rate cut in its latest policy decision due Tuesday. With inflation easing and business investment under pressure, analysts expect continued monetary easing into 2026. Carl Ang of MFS Investment Management forecasts a terminal rate of 3.1% as the RBA navigates persistent global and domestic headwinds.

Australia’s rate path is closely linked to global trade conditions. The country’s reliance on Asia-Pacific trade means that renewed tensions between the US and its regional partners especially China, Japan, and South Korea carry broader implications for sentiment and economic planning.

Trump’s tariff imposition on Japan and South Korea has deepened geopolitical and economic uncertainty, triggering a broad reassessment of currency risks in Asia. The yen’s drop reflects a market narrative increasingly shaped by policy shocks rather than fundamentals. As August 1 approaches, investor anxiety will remain elevated unless clearer guidance on trade exemptions and negotiations materializes. Until then, defensive positioning and heightened sensitivity to political headlines are likely to dominate market behavior.

Source: Reuters

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Economic

Business Conditions Strengthen Amid Easing Economic Pressures

Australia’s business landscape showed clear signs of recovery in June, with the National Australia Bank (NAB) business conditions index rising to +9, up from zero in May. This level exceeds the long-run average of +6 and reflects a significant reversal from earlier softness in 2025. The monthly uptick comes amid growing optimism that lower interest rates and slowing inflation are finally gaining traction across the real economy.

NAB’s business confidence index also gained 3 points to reach +5, marking a third consecutive month of improvement. This sustained rebound in sentiment suggests that firms are cautiously optimistic about future operating conditions, even as global economic headlines remain largely negative.

Chief Economist Sally Auld noted that while monthly data should be interpreted with care, the directional shift is encouraging, particularly after several months of stagnation. The combination of rising sales, improving margins, and broader demand growth points to a turning point in Australia’s post-inflation recovery narrative.

Sectoral Recovery Led by Manufacturing and Retail

The rebound was broad-based but particularly strong in sectors that had previously seen sharp declines. Manufacturing and retail posted the most notable improvements. Retail, in particular, has been under pressure for much of the year due to tepid consumer spending, but June’s bounce suggests that recent monetary easing may finally be filtering through to household demand.

The survey showed business sales surged 10 points to +15, profitability climbed 9 points to +4, and employment edged up 2 points to +3. These improvements imply a stronger underlying demand environment, supported by improved labor market conditions and more stable input prices.

Retail Price Growth Slows as Margin Pressures Persist

Despite the improvement in business activity, some margin pressure remains. While growth in retail prices slowed to 0.6% in June the lowest quarterly pace since early 2023 purchase costs remained elevated at 1.5%. This points to a lag in input cost deflation, suggesting that businesses may still face challenges in fully passing on costs to consumers.

Nonetheless, the moderation in retail price growth aligns with broader inflation data showing core inflation has fallen into the Reserve Bank of Australia’s (RBA) target range of 2% to 3%. This trend supports the case for continued monetary easing.

Monetary Policy Outlook Supports Further Growth

The RBA is widely expected to cut interest rates by another 25 basis points at its upcoming meeting, bringing the policy rate to 3.60%. Markets anticipate additional easing in the months ahead, potentially bringing rates down to 3.10% or lower, as inflation dynamics remain favorable and economic activity begins to pick up.

If the current momentum in business conditions continues, it could signal that the rate cuts delivered earlier in the year are finally gaining economic traction. The rebound in both hard and soft data would give the RBA more confidence in pursuing an easing cycle without jeopardizing price stability.

Australia’s sharp rebound in business activity in June offers early evidence that the economy is responding to looser financial conditions. While margin pressures remain and global risks persist, the recovery in sectors like retail and manufacturing, coupled with improving business sentiment, suggests a more durable upswing may be underway. With further rate cuts on the horizon and inflation trending lower, the stage appears set for a gradual but steady recovery in Australia’s domestic demand through the second half of 2025.

Source: Reuters

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Economic

Stocks

Markets React Cautiously to Tariff Escalation

US equity futures dipped in early trading Tuesday, extending Monday’s losses as investors digested President Trump’s latest wave of tariff threats. Dow futures dropped 0.2%, S&P 500 futures declined 0.07%, and Nasdaq 100 futures slipped 0.1%, reflecting broad-based unease across sectors and trading desks. The pullback follows Monday’s market downturn after Trump unveiled formal letters warning of 25% to 40% tariffs on imports from 14 nations, including major US trading partners Japan, South Korea, and South Africa.

The move marks a sharp escalation in trade policy risk, reigniting fears of a broader protectionist turn that could disrupt global supply chains and weigh on corporate earnings just as the second-quarter earnings season begins. Trump also signed an executive order formally extending the implementation date for April's "Liberation Day" tariffs from July 9 to August 1, offering temporary relief but also prolonging policy uncertainty.

Global Trade Uncertainty Casts Shadow Over Equities

Trump’s letters to foreign leaders shared on his social media platform Truth Social signaled a deliberate reassertion of unilateral trade policy. With countries such as South Korea already responding by accelerating talks with the US, markets are now weighing the possibility of fragmented bilateral negotiations replacing multilateral frameworks.

This uncertainty introduces downside risks not only to trade volumes but also to corporate profitability forecasts, particularly in sectors like technology, manufacturing, and autos, which rely heavily on global sourcing and export markets. The ambiguity over which sectors and goods will ultimately be targeted adds to investor caution, especially in the absence of clear exemptions or defined negotiation outcomes.

Earnings Season and Fed Minutes Loom

Beyond trade tensions, market participants expect a relatively subdued week on the economic data front. The most closely watched event will be the release of the Federal Reserve's June meeting minutes on Wednesday, which could provide additional context on rate-cut expectations. For now, the probability of a July rate cut has been largely priced out, while the likelihood of a September cut remains at 66%, according to CME Group’s FedWatch tool.

Delta Air Lines will unofficially kick off earnings season Thursday, with analysts and investors watching closely for guidance amid high fuel costs, shifting consumer behavior, and global economic crosswinds.

President Trump’s aggressive tariff posture has quickly reintroduced global trade policy as the dominant market narrative, overtaking what had been a calm period following strong jobs data and modest inflation prints. While the delayed implementation of April’s tariffs buys markets a few weeks of breathing room, the direction of travel is clear: markets must now recalibrate for a summer shaped by economic nationalism, fragmented diplomacy, and the reemergence of policy volatility. Until clarity emerges on which countries and which sectors will bear the brunt of these trade shifts, investor caution may continue to cap near-term upside.

Source: Yahoo Finance

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Julia Daniels

China–U.S. Trade War

U.S. President Donald Trump on Monday signed an executive order extending the deadline for his “reciprocal” trade tariffs to August 1 from July 9, as his administration confirmed only a limited number of trade deals.

Trump, along with several White House officials, had touted the August 1 deadline over the past few days, as trade talks with major global economies yielded limited progress towards a deal.

Monday’s order now confirms the August 1 deadline for Trump to impose his “liberation day” tariffs on major economies. The president began releasing letters outlining trade tariffs against several major economies, including a 25% levy on imports from South Korea and Japan.

Speaking to reporters at a White House event, Trump said he was firm but not a "100% certain" on the August 1 deadline, and remained open to more trade talks.

Markets are on edge over the economic impact on Trump’s tariffs, which are widely expected to be borne by U.S. importers. The Federal Reserve has warned that the tariffs could potentially push up inflation.

Source: Investing

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Edward Lawson

China–U.S. Trade War

Key Takeaways:

● Tariffs to impact Japan, South Korea, affecting market stability.

● U.S. markets react with increased volatility.

● Expected indirect impact on cryptocurrency markets.

● Trump Announces 25% Tariffs on Japan, South Korea Imports

The tariffs could lead to increased market volatility and affect ongoing trade negotiations. This decision reflects past policy moves and could influence investor behavior.

Donald Trump announced via Truth Social plans to enact 25% tariffs on imports from Japan and South Korea. These tariffs, effective August 1, were confirmed by White House press secretary Karoline Leavitt. According to Trump's announcement, these tariffs symbolize the cost of benefiting from economic engagement with the U.S. Wall Street's expectations of future trade deals were affected, resulting in broader market fluctuations. The Dow Jones, Nasdaq, and S&P 500 indices reported notable decreases of 1.4%, 1.2%, and 1.2% respectively. Financial markets experienced a shock with expectations of increased volatility in risk assets, including potential spillovers to the crypto market. Economic analysts point to previous attempts by Trump to enact similar tariffs, which were paused due to negative market repercussions.

"The new rates amount to a cost of doing business with 'the extraordinary Economy of the United States, The Number One Market in the World, by far.'" — Donald Trump, Former U.S. President

Past experiences suggest that market disruptions often drive investors towards assets like Bitcoin and Ethereum. This scenario could unfold similarly, increasing their appeal as alternative investment avenues. Predicting regulatory and technological impacts is complex, but understanding market sentiment can guide investment strategies. Historical precedents suggest trade-related shocks might encourage shifts in investment portfolios, favoring digital assets.

Read original article on tokentopnews.com

Source: CryptoSlate

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Hannah Ellis

China–U.S. Trade War

U.S. President Donald Trump said on Monday that the August 1 deadline for imposing reciprocal tariffs is "not 100% firm,” adding that he’s open to alternate proposals if trade partners request changes.

"I would say firm, but not 100% firm. If they call up and they say we’d like to do something a different way, we’re going to be open to that,” Trump told reporters when asked if the deadline for the tariffs was firm.

Earlier in the day, Trump signed an executive order extending the July 9 deadline to Aug. 1.

He also announced new tariff rates on 14 nations, including Japan, Indonesia, South Korea, Serbia, and Tunisia, warning that duties of 25% on key allies such as Japan and South Korea will take effect if no deals are struck.

Notably, the higher tariffs will not combine with previously announced sector tariffs such as those on automobiles, steel, and aluminum.