Global News Summary 7 to 12 July 2025
Markets absorbed a barrage of tariff threats from President Trump—ranging from 35% duties on Canadian goods to blanket tariffs of 15–20% on unaligned partners—without a spike in volatility. Equities hovered near record highs and the VIX fell below 16. This unusual calm, driven by strong megacap performance and investor faith in policy reversals by Trump, masked deeper risks: analysts warned that if tariffs begin biting into earnings or spur inflation, suppressed volatility could reverse sharply. Meanwhile, the Fed minutes flagged concern over persistent inflation, bond yields rose, and copper prices hit records on trade escalation. In tech, OpenAI tightened security after espionage claims, the EU advanced landmark AI regulation, and Nvidia prepped a China-specific chip. Economic signals were mixed - Germany turned optimistic, UK fiscal fragility deepened, China battled deflation, and Japan faced wage erosion. With U.S. CPI data and bank earnings ahead, current market confidence may prove fragile.
Falling VIX amid tariff escalation isn’t optimism—it seems like complacency
United States
Trade War Expansion: President Trump announced:
35% tariffs on Canadian goods, effective August 1.
50% tariffs on Brazilian goods, citing alleged free speech violations.
A 50% copper tariff, which propelled copper prices to a record high.
15–20% blanket tariffs on countries without new trade agreements.
Diplomacy: Secretary of State Marco Rubio is set to meet with China’s foreign minister in Malaysia, marking the first direct U.S.–China diplomatic session of 2025.
Supreme Court Ruling: A key ruling cleared the way for mass federal job cuts, enabling the Trump administration to begin downsizing the U.S. government.
Fed Outlook: June FOMC minutes revealed concerns that the new tariffs could lead to sustained inflation, beyond mere one-off price shocks.
Market Reaction: The 10-Year Treasury yield rose to 4.42% (+7 bps for the week). The USD posted its strongest weekly gain since February (+0.2%). Equities saw a modest retreat, with the S&P 500 down 0.3% and the Dow down 0.7%. Despite the escalating tariffs, the VIX volatility index fell below 16.
United Kingdom
Migration Deal: Prime Minister Starmer and French President Macron reached a reciprocal migrant returns pact aimed at deterring Channel crossings.
Bank of England Warnings: The BoE cautioned that most UK firms could withstand a 10% earnings hit and higher borrowing costs, but also highlighted risks of forced selling in the UK bond market by overleveraged hedge funds.
Fiscal Risks: The Office for Budget Responsibility (OBR) issued a warning about “daunting risks” to public finances, citing rising debt levels and fragile fiscal buffers.
Labor Tension: Doctors in England voted for a six-month strike, posing a significant threat to ongoing NHS reform efforts.
Currency: The Great British Pound (GBP) fell 0.6% to 1.3498 against the USD.
European Union
Trade: The EU is reportedly close to a temporary deal with the U.S. to secure a 10% tariff cap, though the terms are noted to be less favorable than those secured by the UK.
Fiscal Unity: Denmark and Finland opposed joint debt issuance beyond defense, signaling a potential weakening of the EU's crisis response capacity.
AI Regulation: The EU launched a new Code of Practice for General-Purpose AI, which includes copyright protections and mandates independent risk assessments for high-risk AI models. This move proceeded despite intense lobbying from U.S. tech firms.
Germany: Business optimism reached its highest level since early 2022, and investment plans turned positive for the first time in two years, according to S&P Global.
Japan
Tariff Increase: U.S. tariffs on Japan were raised to 25% from 24%, effective August 1.
Wages: Real wages fell by a significant 2.9% year-on-year (YoY) in May, well below the expected -1.7%, creating economic pressure ahead of the July 20 upper house elections.
Markets: Japanese stocks declined due to yen strength and renewed tariff fears. 30-Year bond yields topped 3%, nearing record highs.
Canada
Canada was hit with a substantial 35% U.S. tariff on selected exports, effective August 1, marking a significant trade escalation with a key ally.
Australia
Business Conditions: Surged by +9 points in June, reaching a 12-month high, driven by strong performance in sales, profitability, and hiring.
RBA Surprise: The Reserve Bank of Australia (RBA) kept interest rates unchanged, defying widespread expectations of a hike. The Australian Dollar (AUD) rose, leading G10 currencies.
New Zealand
The Reserve Bank of New Zealand (RBNZ) held rates at 3.25%, pausing after six consecutive cuts. The RBNZ cited rising inflation but maintained an easing bias should inflationary pressures subside.
China
Trade Diversion: Exports to the U.S. plunged 43% YoY in May. However, exports to ASEAN countries increased by 15%, and to the EU by 12%, indicating successful rerouting of trade to mitigate U.S. tariffs.
Deflation Deepens: Factory-gate prices (Producer Price Index - PPI) fell 3.6% YoY in June, signaling deepening deflationary pressures and prompting expectations of further stimulus.
Tech Landscape: Huawei commenced exporting AI chips to Southeast Asia and the Middle East, challenging Nvidia’s regional dominance. OpenAI alleged Chinese espionage, leading to an overhaul of its internal security protocols.
BY THEMES
Economic Growth
Germany: Companies are projecting increased investment for the first time since 2022, signaling a potential uplift in growth.
Australia: Experienced a strong business rebound in June, indicating robust domestic activity.
China: Overall exports showed resilience despite weaknesses in trade with the U.S., driven by diversification.
U.S.: Equity pullback was tempered by strong megacap performance and underlying macro resilience, preventing a broader market downturn.
Jobs
U.S.: A recent Supreme Court ruling has cleared the path for potential mass federal job cuts.
Japan: Real wages declined by 2.9% in May, intensifying economic pressures on households.
UK: The National Health Service (NHS) faces significant labor unrest, with doctors voting for a six-month strike.
No new aggregate U.S. employment data was released this week, but market sentiment has grown more cautious regarding labor-intensive sectors due to tariff impacts and potential government downsizing.
Debt Securities
U.S.: The 10-Year Treasury yield rose to 4.42% (+7 bps for the week) on persistent inflation fears.
Germany: 10-Year Bunds rose slightly to 2.72% (+2 bps).
UK Gilts: The 10-Year gilt yield increased to 4.62% (+3 bps). The Bank of England issued warnings about potential forced selling from overleveraged hedge funds in the UK bond market.
Japan: 30-Year bond yields climbed above 3%, nearing record highs.
Artificial Intelligence
EU: Implemented a landmark AI Code of Practice, emphasizing copyright protections and independent risk assessments for advanced models.
Nvidia: Set to launch a China-specific AI chip in September, navigating geopolitical trade restrictions.
Meta: Further bolstered its AI talent by hiring Apple’s former top AI leader and a co-founder of Safe Superintelligence Inc.
OpenAI: Enhanced internal security after allegations of suspected Chinese espionage targeting its systems.
Huawei: Continued expanding its AI chip exports to Southeast Asia and the Middle East, despite facing production bottlenecks.
ESG (Environmental, Social, Governance)
Bank of England's Sarah Breeden warned that climate change is an escalating systemic risk to the UK’s financial stability. Key risks include inflation shocks, sudden asset repricing, and transition volatility.
No major new global ESG policy was enacted this week, but there is growing concern about increased regulation and potential green fiscal exposure.
Inflation
Fed Minutes: Indicated that tariffs could lead to sustained, rather than merely temporary, price increases across the economy.
Gold: Rose 1% to $3,356.55, acting as a traditional hedge against inflation and economic uncertainty.
China: Deflation risk deepened, with the Producer Price Index (PPI) falling 3.6% YoY in June.
CPI Impact Watch: The upcoming U.S. CPI data (July 16) will be closely watched to determine if tariffs are beginning to transmit to consumer prices.
Recession Risks
UK: Faces heightened recession risks due to fiscal fragility and potential bond market stress from hedge fund deleveraging.
Japan: Is grappling with falling real wages, slowing consumption, and upward pressure on interest rates ahead of national elections, collectively raising recession concerns.
China: Domestic demand remains persistently weak despite efforts to reroute external trade.
U.S.: While there is no clear signal of an imminent recession, ongoing policy instability and the broadening tariff regime could significantly increase uncertainty in the second half of the year.