Global Trade Tensions Escalate Amid Tariff Threats

The EU will postpone its planned retaliatory tariffs on U.S. goods for six months, until at least March, to allow time to implement a recent U.S.-EU trade agreement. The July 27 deal, reached by European Commission President Ursula von der Leyen and President Trump, includes a 15% tariff on most EU goods but currently lacks exemptions for car parts and wine/spirits sought by the EU. The European Commission says the pause aims to restore stability and predictability for businesses and consumers while both sides finalize the agreement.

Asia-Pacific stocks traded mixed after Wall Street losses as investors weighed weak U.S. data and fresh tariff threats from President Trump. Trump said he will announce new tariffs on semiconductors within a week and floated pharmaceutical tariffs up to 250%, pressuring Asian chipmakers: TSMC, Tokyo Electron, Renesas, Samsung, and SK Hynix fell. India’s RBI held its policy rate at 5.5%, shifting to a neutral stance after June’s 50 bps cut. Australia’s S&P/ASX 200 hit a record intraday high, while Japan’s Nikkei dipped and South Korea’s markets fell. Cathay Pacific shares slipped on reports it will place its first Boeing order in 12 years. U.S. markets closed lower, with the S&P 500, Nasdaq, and Dow all declining.

CNBC’s Daily Open highlights that President Trump, in a lengthy CNBC interview, signaled no shift in his policy stance. He plans new sector-specific tariffs, with semiconductor duties expected within a week and pharmaceutical tariffs starting small and rising to as high as 250% within 18 months. He continues to challenge the Federal Reserve, floating candidates to replace Chair Jerome Powell ahead of 2026. Markets softened on weak U.S. services data, while Asia’s chip stocks fell on tariff fears. Elsewhere, OpenAI is exploring a secondary sale valuing it around $500 billion, India’s central bank held rates at 5.5%, and the S&P 500’s solid earnings have met muted investor reaction. The newsletter also notes the U.S. imposing a 41% tariff on Syria despite lifting sanctions earlier.

European stocks were set for a mildly positive open as investors digested a heavy earnings slate and tariff risks. Siemens Energy led with record orders and guided toward the upper end of its outlook, while Fresenius and Commerzbank also raised full-year guidance despite Commerzbank’s profit dip on restructuring costs. Novo Nordisk posted strong revenue growth with Wegovy sales up 67%. Banco BPM delivered record H1 profit and signaled potential M&A, Ahold Delhaize reiterated its outlook, and Zalando lifted guidance after acquiring About You. Glencore’s profit fell on lower coal prices and copper headwinds, reaffirming its London listing. Deutsche Bank said European earnings are beating expectations, with more firms raising guidance, though it warned tariffs could cut 2025 earnings growth by about 4%, leaving a 3% full-year forecast. UK fiscal concerns loomed as a think tank warned of a potential £51 billion budget gap. Markets also watched for possible new U.S. chip tariffs signaled by President Trump.

Honda’s quarterly operating profit fell 50% year over year to 244.2 billion yen, missing estimates, as U.S. auto tariffs and a stronger yen pressured results. Revenue was 5.34 trillion yen, slightly above expectations. Despite the weak quarter and a 5% drop in global sales amid declines in China, Asia, and Europe, Honda raised its full-year operating profit forecast by 40% to 700 billion yen. Japanese automakers have cut U.S.-bound prices in response to a 25% U.S. tariff, with a potential reduction to 15% announced but not yet dated. Japan is pushing Washington to finalize the tariff cut, as auto exports to the U.S. are critical to its economy.

India’s central bank kept the repo rate unchanged at 5.5%, pausing after June’s 50 bps cut amid rising U.S. tariff threats from President Trump over India’s Russia ties. The decision was unanimous, with the RBI maintaining a neutral stance and signaling data dependence as external demand remains uncertain. The RBI left FY2025-26 GDP growth at 6.5% and lowered its inflation forecast to 3.1% as June headline inflation fell to a six-year low of 2.1%, well below the 4% target. Markets reacted modestly; analysts expect a pause now with potential easing later in 2025 if the outlook weakens. India’s economy grew 7.4% y/y in the March quarter, with FY2024-25 growth at 6.5%.

U.S. companies are running out of ways to shield profits from tariffs imposed under Donald Trump’s trade policies. After initially weathering higher costs through price rises, supply-chain tweaks, and currency moves, firms from GM to Nike are now seeing profits squeezed as they absorb roughly three-fifths of tariff costs, according to Goldman Sachs. With fewer offsets left, margins are deteriorating and a broader profit hit may be looming across corporate America.

After President Trump raised broad U.S. tariffs on Canada to 35% and talks collapsed, Canadian Prime Minister Mark Carney downplayed immediate retaliation and shifted focus to reducing reliance on the U.S. by strengthening domestic capacity and expanding into new markets. While 85% of bilateral trade remains tariff-free under North American rules, Canadian autos face a 25% tariff adjusted by U.S. content, and steel and aluminum face 50% tariffs, prompting layoffs at Algoma Steel and shift cuts at GM Canada. Carney, who previously imposed targeted counter-tariffs but has since granted exemptions to limit harm at home, signaled a cautious approach to further retaliation. He announced C$1.2 billion in support for the lumber sector—loan guarantees and funding to develop new products and markets—and recently unveiled aid and import quotas for steel, positioning policy toward industry support and diversification rather than escalating a trade fight.

Swiss President Karin Keller-Sutter and Business Minister Guy Parmelin are in Washington for last-minute talks to avert impending 39% U.S. tariffs on Swiss imports announced by President Donald Trump. Keller-Sutter will meet U.S. Secretary of State Marco Rubio on Wednesday for a one-hour closed-door session at the State Department. Switzerland, whose export-driven economy relies heavily on the U.S. market for watches, machinery and chocolate, warns the tariffs could harm jobs and trade; industry group Swissmem backed the government’s push for a deal.