Global shares slide after Trump's tariff salvo
The pan-European STOXX 600 fell 1.3%, taking its weekly fall to almost 2%, which would be its biggest weekly drop since US President Donald Trump announced so-called reciprocal tariffs on April 2.
Both Nasdaq futures and S&P 500 futures were down around 1%.
Late on Thursday, Trump signed an executive order imposing tariffs ranging from 10% to 41% on U.S. imports from foreign countries and territories. Rates were set at 25% for India's US-bound exports, 20% for Taiwan's, 19% for Thailand's and 15% for South Korea's.
He also increased duties on Canadian goods to 35% from 25% for all products not covered by the US-Mexico-Canada trade agreement, but gave Mexico a 90-day reprieve from higher tariffs to negotiate a broader trade deal.
"The Aug 1 announcement on reciprocal tariffs is somewhat worse than expected," said Wei Yao, research head and chief economist in Asia at Société Générale.
Market reaction was not as volatile as April's global asset declines, she added. "We are all getting much more used to the idea of 15-20% tariffs being manageable and acceptable, thanks to the worse threats earlier."
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5%, bringing the total loss this week to roughly 2.7%.
Japan's Nikkei closed 0.7% lower, Chinese blue chips ended 0.5% down, and Hong Kong's Hang Seng index lost more than 1%.
On Thursday, Wall Street failed to hold onto an earlier rally. Data showed US inflation picked up in June, with new tariffs pushing prices higher and stoking expectations that price pressures could intensify, while weekly jobless claims signalled the labour market remained on a stable footing.
Fed funds futures imply just a 45% chance of a rate cut in September, compared with 65% before the Federal Reserve held rates steady on Wednesday, according to LSEG data.
Much now will depend on the US jobs data due later in the day, and any upside surprise could price out the chance for a cut next month. Forecasts are centred on a rise of 110,000 in nonfarm payrolls in July.
"Fed Chair Jay Powell has placed greater emphasis on the unemployment rate, which is expected to rise marginally from 4.1% to 4.2%," said ING FX strategist Francesco Pesole.
"Hardly enough to sound the alarm on the jobs market."
The greenback found support from fading prospects of imminent US rate cuts, with the dollar index up 1.5% this week against its peers to 100, in the biggest weekly rise since September 2022.
The yen weakened past 150 per dollar for the first time since April. The Bank of Japan held interest rates steady on Thursday and revised up its near-term inflation expectations, but Governor Kazuo Ueda sounded a little dovish in the press conference.
Two-year Treasury yields fell one basis point to 3.9449%, while benchmark 10-year yields rose 3 basis points to 4.388%, after slipping 2 bps the day before.
In commodity markets, oil prices continued to fall after a 1% plunge on Thursday. Brent fell 1% to US$70.97 per barrel, while U.S. crude fell 1% to US$68.53 per barrel.
Spot gold rose 0.3% to US$3,298 an ounce. – Reuters
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The Star
3 hours ago
- The Star
From Laos to Brazil, Trump's tariffs leave a lot of losers. But even the winners like Vietnam will pay a price
WASHINGTON (AP): President Donald Trump's tariff onslaught this week left a lot of losers - from small, poor countries like Laos and Algeria to wealthy US trading partners like Canada and Switzerland. They're now facing especially hefty taxes - tariffs - on the products they export to the United States starting Aug. 7. The closest thing to winners may be the countries that caved to Trump's demands - and avoided even more pain. But it's unclear whether anyone will be able to claim victory in the long run - even the United States, the intended beneficiary of Trump's protectionist policies. "In many respects, everybody's a loser here,'' said Barry Appleton, co-director of the Center for International Law at the New York Law School. Barely six months after he returned to the White House, Trump has demolished the old global economic order. Gone is one built on agreed-upon rules. In its place is a system in which Trump himself sets the rules, using America's enormous economic power to punish countries that won't agree to one-sided trade deals and extracting huge concessions from the ones that do. "The biggest winner is Trump,' said Alan Wolff, a former U.S. trade official and deputy director-general at the World Trade Organization. "He bet that he could get other countries to the table on the basis of threats, and he succeeded - dramatically.'' Everything goes back to what Trump calls "Liberation Day'' - April 2 - when the president announced "reciprocal'' taxes of up to 50% on imports from countries with which the United States ran trade deficits and 10% "baseline'' taxes on almost everyone else. He invoked a 1977 law to declare the trade deficit a national emergency that justified his sweeping import taxes. That allowed him to bypass Congress, which traditionally has had authority over taxes, including tariffs - all of which is now being challenged in court. Trump retreated temporarily after his Liberation Day announcement triggered a rout in financial markets and suspended the reciprocal tariffs for 90 days to give countries a chance to negotiate. Eventually, some of them did, caving to Trump's demands to pay what four months ago would have seemed unthinkably high tariffs for the privilege of continuing to sell into the vast American market. The United Kingdom agreed to 10% tariffs on its exports to the United States - up from 1.3% before Trump amped up his trade war with the world. The US demanded concessions even though it had run a trade surplus, not a deficit, with the UK for 19 straight years. The European Union and Japan accepted U.S. tariffs of 15%. Those are much higher than the low single-digit rates they paid last year - but lower than the tariffs he was threatening (30% on the EU and 25% on Japan). Also cutting deals with Trump and agreeing to hefty tariffs were Pakistan, South Korea, Vietnam, Indonesia and the Philippines. Even countries that saw their tariffs lowered from April without reaching a deal are still paying much higher tariffs than before Trump took office. Angola's tariff, for instance, dropped to 15% from 32% in April, but in 2022 it was less than 1.5%. And while Trump administration cut Taiwan's tariff to 20% from 32% in April, the pain will still be felt. "20% from the beginning has not been our goal, we hope that in further negotiations we will get a more beneficial and more reasonable tax rate,' Taiwan's president Lai Ching-te told reporters in Taipei Friday. Trump also agreed to reduce the tariff on the tiny southern African kingdom of Lesotho to 15% from the 50% he'd announced in April, but the damage may already have been done there. Countries that didn't knuckle under - and those that found other ways to incur Trump's wrath - got hit harder. Even some of the poor were not spared. Laos' annual economic output comes to $2,100 per person and Algeria's $5,600 - versus America's $75,000. Nonetheless, Laos got rocked with a 40% tariff and Algeria with a 30% levy. Trump slammed Brazil with a 50% import tax largely because he didn't like the way it was treating former Brazilian President Jair Bolsonaro, who is facing trial for trying to lose his electoral defeat in 2022. Never mind that the U.S. has exported more to Brazil than it's imported every year since 2007. Trump's decision to plaster a 35% tariff on longstanding U.S. ally Canada was partly designed to threaten Ottawa for saying it would recognize a Palestinian state. Trump is a staunch supporter of Israeli Prime Minister Benjamin Netanyahu. Switzerland was clobbered with a 39% import tax - even higher than the 31% Trump originally announced on April 2. "The Swiss probably wish that they had camped in Washington'' to make a deal, said Wolff, now senior fellow at the Peterson Institute for International Economics. "They're clearly not at all happy.'' Fortunes may change if Trump's tariffs are upended in court. Five American businesses and 12 states are suing the president, arguing that his Liberation Day tariffs exceeded his authority under the 1977 law. In May, the U.S. Court of International Trade , a specialized court in New York, agreed and blocked the tariffs, although the government was allowed to continue collecting them while its appeal wend its way through the legal system, and may likely end up at the U.S. Supreme Court. In a hearing Thursday, the judges on the U.S. Court of Appeals for the Federal Circuit sounded skeptical about Trump's justifications for the tariffs. "If (the tariffs) get struck down, then maybe Brazil's a winner and not a loser,'' Appleton said. Trump portrays his tariffs as a tax on foreign countries. But they are actually paid by import companies in the U.S. who try to pass along the cost to their customers via higher prices. True, tariffs can hurt other countries by forcing their exporters to cut prices and sacrifice profits - or risk losing market share in the United States. But economists at Goldman Sachs estimate that overseas exporters have absorbed just one-fifth of the rising costs from tariffs, while Americans and U.S. businesses have picked up the most of the tab. Walmart, Procter & Gamble, Ford, Best Buy, Adidas, Nike, Mattel and Stanley Black & Decker, have all hiked prices due to U.S. tariffs. "This is a consumption tax, so it disproportionately affects those who have lower incomes,'' Appleton said. "Sneakers, knapsacks ... your appliances are going to go up. Your TV and electronics are going to go up. Your video game devices, consoles are going to up because none of those are made in America.'' Trump's trade war has pushed the average U.S. tariff from 2.5% at the start of 2025 to 18.3% now, the highest since 1934, according to the Budget Lab at Yale University. And that will impose a $2,400 cost on the average household, the lab estimates. "The US consumer's a big loser,″ Wolff said. -- AP Economics Writer Christopher Rugaber contributed to this story.
Free Malaysia Today
6 hours ago
- Free Malaysia Today
Stocks cheer Trump's trade deals after EU agreement
Europe accepted the 15% US tariff as better than the threatened 30%, though it fell short of hopes for zero tariffs. (EPA Images pic) SINGAPORE : Global stocks rose and the euro firmed on Monday after a trade agreement between the US and the EU lifted sentiment and provided clarity in a pivotal week headlined by the Federal Reserve and the Bank of Japan policy meetings. The US struck a framework trade agreement with the European Union, imposing a 15% import tariff on most EU goods – half the threatened rate, a week after agreeing to a trade deal with Japan that lowered tariffs on auto imports. Countries are scrambling to finalise trade deals ahead of the Aug 1 deadline, with talks between the US and China set for Monday in Stockholm amid expectation of another 90-day extension to the truce between the top two economies. 'A 15% tariff on European goods, forced purchases of US energy and military equipment and zero tariff retaliation by Europe, that's not negotiation, that's the art of the deal,' said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. 'A big win for the US.' S&P 500 futures rose 0.4% and the Nasdaq futures gained 0.5% while the euro firmed across the board, rising against the dollar, sterling and yen. European futures surged nearly 1%. In Asia, Japan's Nikkei slipped after touching a one-year high last week while MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.27%, just shy of the almost four-year high it touched last week. While the baseline 15% tariff will still be seen by many in Europe as too high, compared with Europe's initial hopes to secure a zero-for-zero tariff deal, it is better than the threatened 30% rate. The deal with the EU provides clarity to companies and averts a bigger trade war between the two allies that account for almost a third of global trade. 'Putting it all together, what we've seen with Japan, with the EU, with the talks which are due to be held in Stockholm between the US and China, it really does negate the risk of a prolonged trade war,' said Tony Sycamore, market analyst at IG. 'The importance of the August tariff deadline has significantly been diffused.' The Australian dollar, often seen as a proxy for risk sentiment, was 0.12% higher at US$0.65725 in early trading, hovering around the near eight-month peak scaled last week. Fed, BOJ await In an action-packed week, investors will watch out for the monetary policy meetings from the Fed and the BOJ as well as the monthly US employment report and earnings reports from megacap companies Apple, Microsoft and Amazon. While the Fed and the BOJ are expected to stand pat on rates, comments from the officials will be crucial for investors to gauge the interest rate path. The trade deal with Japan has opened the door for the BOJ to raise rates again this year. Meanwhile, the Fed is likely to be cautious on any rate cuts as officials seek more data to determine if tariffs are worsening inflation before they ease rates further. But tensions between the White House and the central bank over monetary policy have heightened, with Trump repeatedly denouncing Fed chair Jerome Powell for not cutting rates. Two of the Fed Board's Trump appointees have articulated reasons for supporting a rate cut this month. ING economists expect December to be the likely starting point for rate cuts, but it 'may be a 50 basis point cut, if the evidence on weaker jobs and GDP growth becomes more apparent as we anticipate.' 'This would be a similar playbook to the Federal Reserve's actions in 2024, where it waited until it was completely comfortable to commit to a lower interest rate environment,' they said in a note.
Free Malaysia Today
6 hours ago
- Free Malaysia Today
US says differences with India cannot be resolved overnight for deal
India faced Western pressure to distance itself from longstanding ties with Russia and the BRICS group of developing nations. (Reuters pic) WASHINGTON : Differences between the US and India cannot be resolved overnight to arrive at a trade deal, a senior US official told reporters late on Thursday, citing geopolitical disagreements. President Donald Trump said on Wednesday Washington was still negotiating with India on trade after announcing earlier that day the US would impose a 25% tariff on goods imported from the country starting on Friday. The 25% figure would single out India more severely than other major trading partners, and threaten to unravel months of talks between the two countries, undermining a strategic partner of Washington's and a counterbalance to China. 'Our challenges with India, they've always been a pretty closed market… there are a host of other kind of geopolitical issues,' the US official said. 'You've seen the president express concern about, you know, membership in BRICS, purchases of Russian oil and that kind of thing.' While saying there were constructive discussions with India, the official added: 'These are complex relationships and complex issues, and so I don't think things can be resolved overnight with India.' India has faced pressure from the West, including the US, to distance itself from Moscow after Russia invaded Ukraine in early 2022. New Delhi resisted that pressure, citing its longstanding ties with Russia and its economic needs. Trump has cast the BRICS group of developing nations – of which India is a key part – as hostile to the US. Those nations have dismissed that accusation and the group says it promotes the interests of its members and of developing countries at large. Trump has also drawn India's frustration by repeatedly taking credit for an India-Pakistan ceasefire that he announced on social media on May 10. The ceasefire halted days of hostilities between the nuclear armed Asian neighbours. India's position has been that New Delhi and Islamabad must resolve their issues directly without outside involvement. Trump has reached a trade deal with India's rival Pakistan.
