President Trump steps up tariff threats

US President Donald Trump has further ramped up rhetoric on tariffs over the past 24 hours, as he has vowed that he will press ahead with the implementation of the so-called reciprocal US tariffs on trading countries from August 1 – perhaps conscious of the relatively muted market reaction to those announced the previous day and commentary around the ‘TACO’ trade. He also signaled that a further seven countries would receive their letters detailing their new tariff rate today. In other tariff developments, Trump said that he believed that tariffs on copper imports would be raised to 50% and warned of higher tariffs to come for pharmaceuticals that could be as high as 200% even if businesses have 12-18 months to move their manufacturing to the US.

The LSEG Deals Intelligence report for Q1 notes a surge in takeover deals emanating from the MENA region as they rose to USD 115.5bn in H1 2025, up 149% y/y. Much of this is driven by the UAE and Saudi Arabia, with energy deals a particular growth sector.

CPI inflation in China stood at 0.1% in June, up from -0.1% the previous month. This was the first inflationary reading for the index since January, with demand boosted by consumer subsidies. However, it was only marginally positive, and PPI inflation was at -3.6%, the sharpest fall in nearly two years, suggesting that deflationary pressures remain to the fore in China.

The Reserve Bank of New Zealand kept its official cash rate on hold at 3.25% this morning, as had been widely anticipated. The bank expects inflation to return to the midpoint by early 2026 and that there will be a gradual recovery in domestic economic activity. This followed the Reserve Bank of Australia’s surprise decision to keep its cash rate target on hold at 3.85% yesterday, confounding consensus predictions of a 25bps cut. The vote was 6-3 in favour of a hold, with strong domestic demand given as one of the deciding factors.

Today’s Economic Data and Events

22:00 US FOMC meeting minutes, June 18

Fixed Income

• Soft auction demand and paring expectations of rate cuts from the Fed following the strong NFP report last week continue to weigh on USTs.
• While the 2yr closed broadly flat yesterday with a yield of 3.8905%, the 10yr notched up a fifth straight day of losses as yields rose 2bps to 4.3992%.

FX

• FX markets were mixed yesterday for the majors. While GBP closed down 0.1% against the greenback and the JPY lost 0.4% as Japan came under tariff focus (taking the currencies down to 1.3592 and 146.58 respectively) there were gains elsewhere.
• The AUD strengthened by 0.6% to 0.6530 as the RBA surprised with a hold at its meeting yesterday, while CAD strengthened 0.2% to 1.3685 as oil prices rose. EUR closed up 0.1% to 1.1725.

Equities

• US equity markets took the latest tariff developments in their stride yesterday, with little sign of major concern following the issuing of letters at the start of the week. The Dow Jones fell 0.4% but the S&P 500 was down only 0.1% while the NASDAQ closed flat.
• European stocks had a positive day with the FTSE 100 up 0.5% and both the DAX and the CAC closing 0.6% higher.
• The DFM closed down 0.1% while the ADX added 0.1%. Saudi Arabia’s Tadawul closed 0.5% lower.

Commodities

• Brent futures closed up 0.8% yesterday to USD 70.2, the first close above the 70 mark since 23 June. WTI climbed 0.6% to USD 68.3/b.
• The API reported a 7.1mn bbl rise in crude inventories last week.