Investors eye US-Europe deal before deadline
Investors are hopeful a potential trade deal between the US and European Union could bring more certainty to markets ahead of next Friday's tariffs deadline.
European Commission President Ursula von der Leyen was set to meet US President Donald Trump on Sunday in Scotland after EU officials and diplomats said they expected to reach a framework deal this weekend. Trump on Friday said there was a 50-50 chance or perhaps less that the US would reach a trade agreement with the EU.
Trade tensions between the US and Europe may have provided some investors with a rationale to be cautious, said Sameer Samana, Head of Global Equities and Real Assets at Wells Fargo Investment Institute. "It's one of our largest trading relationships... So if that last piece falls into place, then you've probably got at the margin more people that have to get back in the markets," Samana said. "It's been a source of uncertainty that will go away."
A deal would likely include a 15% baseline tariff on all EU goods entering the US and probably a 50% tariff on European steel and aluminum, the officials and diplomats said. Optimism over easing trade tensions broadly has helped push US stocks to record highs. Trump's April 2 "Liberation Day" announcement of sweeping global tariffs sent stocks plunging in the immediate aftermath, due to spiking fears about a recession that have since faded.
Still, investors have been bracing for increased volatility heading into August 1, which the US has set as a deadline for raising levies on a broad swath of trading partners.
The EU is facing US tariffs on more than 70% of its exports – 50% on steel and aluminum, 25% on cars and car parts and a 10% levy on most other EU goods, which Trump has said he would hike to 30% on August 1. Hopes for a deal with Europe rose after Trump struck a trade agreement with Japan earlier in the week.
"The deal with Japan and the likely one soon with the EU are especially important given both are major US trading partners, together accounting for about a quarter of all goods' imports," analysts at Capital Economics said in a note on Friday.
In the agreement with Japan, the country's auto sector, which accounts for more than a quarter of its US exports, will see existing tariffs cut to 15% from levies totaling 27.5% previously.
An agreement that also lowers EU auto tariffs to 15% "would be no small deal" for the region as well, as about 10% of its shipments to the US are in the same category, Capital Economics said.
Investors over the weekend were also watching for developments on trade between the US and China. Officials from the two countries plan to meet in Stockholm next week to discuss extending an August 12 deadline for negotiating a deal.
Seoul seeks mutually agreeable package
Meanwhile, South Korea will prepare a trade package that is mutually agreeable with the US ahead of minister-level meetings planned for next week and a US tariff-pause deadline of August 1, the presidential office said on Saturday.
The package will include shipbuilding cooperation, a sector of high interest to US Commerce Secretary Howard Lutnick, who discussed the matter with South Korea Industry Minister Kim Jung-kwan on Friday, it said in a statement.
Friday's meeting was a follow-up to a meeting on Thursday, where Lutnick and Kim reaffirmed their commitment to reach a trade deal by August 1, after a joint meeting of finance ministers and top trade envoys that had been scheduled for Friday was postponed.
South Korea, facing 25% tariffs, is rushing to reach a trade deal with Washington, with National Security Adviser Wi Sung-lac visiting the US recently for high-level talks and Minister for Trade Yeo Han-koo also in the US for negotiations, as pressure grows on officials to clinch a deal that is no worse than Japan's that cut tariffs to 15%.
South Korea's trade negotiations with the US have included non-tariff barriers in the agricultural and digital service sectors, but foreign exchange has not been part of trade talks beyond usual consultations, according to South Korean officials.
South Korea Finance Minister Koo Yun-cheol and Foreign Minister Cho Hyun will also hold meetings with US Treasury Secretary Scott Bessent and State Secretary Marco Rubio, respectively, next week.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
29 minutes ago
- Business Recorder
US, China to launch new talks on tariff truce extension, easing path for Trump-Xi meeting
STOCKHOLM: Top US and Chinese economic officials will resume talks in Stockholm on Monday to try to tackle longstanding economic disputes at the centre of a trade war between the world's top two economies, aiming to extend a truce by three months and keeping sharply higher tariffs at bay. China is facing an August 12 deadline to reach a durable tariff agreement with President Donald Trump's administration, after Beijing and Washington reached preliminary deals in May and June to end weeks of escalating tit-for-tat tariffs and a cut-off of rare earth minerals. Without an agreement, global supply chains could face renewed turmoil from U.S. duties snapping back to triple-digit levels that would amount to a bilateral trade embargo. The Stockholm talks come hot on the heels of Trump's biggest trade deal yet with the European Union on Sunday for a 15% tariff on most EU goods exports to the U.S., including autos. The bloc will also buy $750 billion worth of American energy and make $600 billion worth of U.S. investments in coming years. No similar breakthrough is expected in the U.S.-China talks but trade analysts said that another 90-day extension of a tariff and export control truce struck in mid-May was likely. An extension of that length would prevent further escalation and facilitate planning for a potential meeting between Trump and Chinese President Xi Jinping in late October or early November. A U.S. Treasury spokesperson declined comment on a South China Morning Post report quoting unnamed sources as saying the two sides would refrain from introducing new tariffs or other steps that could escalate the trade war for another 90 days. Trump's administration is poised to impose new sectoral tariffs that will impact China within weeks, including on semiconductors, pharmaceuticals, ship-to-shore cranes and other products. 'We're very close to a deal with China. We really sort of made a deal with China, but we'll see how that goes,' Trump told reporters on Sunday before European Commission President Ursula von der Leyen struck their tariff deal. Deeper issues Previous U.S.-China trade talks in Geneva and London in May and June focused on bringing U.S. and Chinese retaliatory tariffs down from triple-digit levels and restoring the flow of rare earth minerals halted by China and Nvidia's H20 AI chips and other goods halted by the United States. So far, the talks have not delved into broader economic issues. They include U.S. complaints that China's state-led, export-driven model is flooding world markets with cheap goods, and Beijing's complaints that U.S. national security export controls on tech goods seek to stunt Chinese growth. US, China to resume tariff talks in effort to extend truce 'Geneva and London were really just about trying to get the relationship back on track so that they could, at some point, actually negotiate about the issues which animate the disagreement between the countries in the first place,' said Scott Kennedy, a China economics expert at the Center for Strategic and International Studies in Washington. 'I'd be surprised if there is an early harvest on some of these things but an extension of the ceasefire for another 90 days seems to be the most likely outcome,' Kennedy said. U.S. Treasury Secretary Scott Bessent has already flagged a deadline extension and has said he wants China to rebalance its economy away from exports to more domestic consumption – a decades-long goal for U.S. policymakers. Analysts say the U.S.-China negotiations are far more complex than those with other Asian countries and will require more time. China's grip on the global market for rare earth minerals and magnets, used in everything from military hardware to car windshield wiper motors, has proved to be an effective leverage point on U.S. industries. Trump-XI meeting? In the background of the talks is speculation about a possible meeting between Trump and Xi in late October. Trump has said he will decide soon on a landmark trip to China, and a new flare-up of tariffs and export controls would likely derail planning. Sun Chenghao, a fellow at Tsinghua University's Center for International Security and Strategy in Beijing, said that a Trump-Xi summit would be an opportunity for the U.S. to lower the 20% tariffs on Chinese goods related to fentanyl. In exchange, he said the Chinese side could make good on its 2020 pledge to increase purchases of U.S. farm products and other goods. 'The future prospect of the heads of state summit is very beneficial to the negotiations because everyone wants to reach an agreement or pave the way in advance,' Sun said. Still, China will likely request a reduction of multi-layered U.S. tariffs totaling 55% on most goods and further easing of U.S. high-tech export controls, analysts said. Beijing has argued that such purchases would help reduce the U.S. trade deficit with China, which reached $295.5 billion in 2024.
Business Recorder
29 minutes ago
- Business Recorder
Risk boost from US-EU trade deal of little help to Indian rupee as outflows persist
MUMBAI: The Indian rupee is expected to open little changed on Monday, with any support from improved risk sentiment after a trade deal between the European Union (EU) and the U.S. likely to be capped by persistent foreign portfolio outflows. The 1-month non-deliverable forward indicated the rupee will open in the 86.48-86.51 range versus the U.S. dollar, compared with Friday's close of 86.5150. Global stocks rose and the euro firmed after the weekend deal between the EU and the U.S., which set the import tariff on most EU goods at 15% - half the rate initially threatened. Asian currencies traded mixed, while the dollar index was at 97.6. The U.S.-EU trade pact is expected to reduce trade-related uncertainty in a week dominated by central bank policy decisions and the U.S.'s August 1 deadline for trading partners to strike deals. Washington has already signed similar framework accords with Britain, Japan, Indonesia and Vietnam. Meanwhile, India's trade minister told Reuters last week that the country is also hopeful of reaching a deal with the U.S. that includes 'special and preferred treatment'. Alongside these, monetary policy meetings in the U.S., Japan and other economies will be in focus this week. While the Federal Reserve is widely expected to keep rates unchanged, ANZ said it will watch for 'tweaks to the language' in the Fed's statement and Chair Jerome Powell's comments for clues on possible rate cuts in September. Over the week, traders expect the rupee to hover between 86.20 and 86.80-86.90, with a slight depreciation bias given the persistent outflows from local stocks. Foreign investors have net sold Indian equities worth about $750 million so far in July, reversing three months of inflows.
Business Recorder
29 minutes ago
- Business Recorder
Gold falls to near two-week low after US, EU agree to tariff deal
Gold prices fell to their lowest level in nearly two weeks on Monday, as a framework trade agreement between the United States and European Union ahead of the August 1 tariff deadline boosted appetite for risk assets. Spot gold was down 0.1% at $3,332.18 per ounce, as of 0208 GMT, after touching its lowest level since July 17. U.S. gold futures edged 0.1% lower to $3,331.60. The U.S. struck a framework trade agreement with the European Union on Sunday, imposing a 15% import tariff on most EU goods - half the threatened rate - and averting a bigger trade war between the two allies that account for almost a third of global trade. However, the agreement left key issues unresolved, including tariffs on spirits. The agreement eased transatlantic trade tensions, putting pressure on gold, said Jigar Trivedi, a senior commodity analyst at Reliance Securities, adding that it also softened the dollar index, which provided some cushion to bullion. The U.S. dollar index eased 0.1%, making greenback-priced bullion more affordable for overseas buyers. Risk sentiment improved following the agreement, with European currencies and U.S. stock index futures trading higher. Meanwhile, senior U.S. and Chinese negotiators are set to meet in Stockholm later in the day to address long-standing economic disputes, seeking to extend a truce that has prevented higher tariffs. 'In the short term, we don't expect gold to experience wild swings. Investors are turning their focus to a pivotal week for U.S. monetary policy and economic data,' Trivedi said. The Federal Reserve is expected to maintain its benchmark interest rate in the 4.25%-4.50% range after its two-day policy meeting concludes on Wednesday. U.S. President Donald Trump said on Friday he had a positive meeting with Powell, suggesting the Fed chief might be inclined to lower interest rates. Spot silver was up 0.2% at $38.23 per ounce, while platinum gained 0.6% to $1,409.50 and palladium rose 0.6% to $1,227.76.
