Euro zone bond yields rise as U.S. tariff deadline looms
Germany's 10-year Bund yields rose 2 basis points to 2.584%, while U.S. 10-year Treasury yields remained steady at 4.3379%.
President Donald Trump stated on Sunday that the U.S. is nearing final trade agreements and will announce higher tariff rates by July 9, set to take effect on August 1.
This has kept markets on edge, anticipating potential volatility as details on trade policies emerge.
German two-year yields, sensitive to interest rate expectations, edged up slightly to 1.82%, hovering near a three-week low.
Meanwhile, Italian 10-year yields increased by 2.3 basis points to 3.493%, widening the spread over German Bunds to 90 basis points, according to LSEG data.
In the UK, the 10-year gilt yield held steady at 4.56%, still elevated after last week's sharp sell-off triggered by a reversal in planned welfare spending cuts.
On a positive note, German industrial production exceeded expectations in May, driven by strong performance in the automotive and energy sectors, as reported by the federal statistics office.
Later in the day, European Central Bank policymakers Joachim Nagel and Robert Holzmann are scheduled to speak, potentially offering further insights into monetary policy direction. - Reuters
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New Straits Times
17 minutes ago
- New Straits Times
Impact of US tariffs on Malaysia: What steps should be taken?
KUALA LUMPUR: United States (US) President Donald Trump has announced that a 25 per cent import tariff will be imposed on products from Malaysia starting Aug 1. The move, officially communicated via a letter to Prime Minister Datuk Seri Anwar Ibrahim, is said to be part of a broader strategy to rebalance US trade. While the tariff may be legally justified under international trade rules, it is a blow to Malaysia's economy, especially key export sectors such as electrical and electronics (E&E), manufacturing, palm oil, textiles, and rubber products including gloves. Malaysian Tax Accountants Association deputy president Dr Mohd Fairuz A Razak said the 25 per cent US tariff is a clear sign that global trade is becoming increasingly unstable. He said Malaysia cannot afford to stick with a slow-moving system that relies too heavily on outdated policies. "Such tariffs are a test of Malaysia's economic structural resilience. The country cannot simply rely on diplomacy or rhetoric — it must move quickly with comprehensive adjustments in fiscal, tax, and investment policies," he said. Here are some of the major impacts Malaysia faces from the 25 per cent US tariff: Decline in exports Malaysian products will become more expensive in the US market. This could drive American buyers to seek alternatives from countries like Vietnam, which are not subject to tariffs. Lower corporate earnings Manufacturers will face margin pressures as profits decline, production slows, and new investments are postponed. Reduced tax revenue The government is expected to collect less tax revenue due to lower corporate income tax arising from reduced profits. Sales and Service Tax (SST) collections may also fall as domestic production decreases. Meanwhile, Real Property Gains Tax may rise if factories or industrial assets are sold due to closures or downsizing. Threat to foreign investment Foreign investors, especially from the US, may consider relocating to neighbouring countries with more business-friendly and cost-effective policies. Malaysia now falls into the category of "at-risk countries" in terms of labour cost, tax policies, and international trade relationships. This calls for urgent policy reforms to keep Malaysia relevant and competitive in the region. In response, Mohd Fairuz said the government must act swiftly and comprehensively. Among the strategic measures that should be considered are: Immediate bilateral negotiations The Investment, Trade and Industry Ministry and the Foreign Ministry should initiate specific talks with the US to secure exemptions for certain sectors or to gradually reduce tariff rates. The Malaysia-US strategic relationship should not be defined solely by trade imbalances. Malaysia should offer strategic investment cooperation with the US. Targeted SST restructuring The government should reconsider SST implementation on export-related inputs. Tax exemptions on these inputs could help ease cost pressures on manufacturers. Another approach would be to exempt SST on export inputs to prevent double taxation on exporting companies. Special industrial electricity rates Introducing subsidised electricity rates for strategic industries like E&E and automotive can help offset the external tariff burden and maintain competitiveness. The government should also encourage automation and energy efficiency investments. Tax-free and SST-free economic zones Create special export production zones exempt from SST and granted fiscal flexibility, such as in Batu Kawan, Iskandar Malaysia, and Kulim Hi-Tech Park. This could also attract reinvestments from US companies. Additionally, tax incentives could be offered to companies that maintain export operations in Malaysia. Enhanced investment and digitalisation incentives The government can introduce digital tax rebates, automation investment allowances, and Green Investment Tax Incentives to attract foreign investors to stay or expand in Malaysia. Small and medium enterprises should be encouraged to adopt technology to reduce costs and stay competitive.
The Sun
an hour ago
- The Sun
China warns Trump on tariffs, threatens retaliation over supply chain deals
BEIJING: China issued a stern warning to the Trump administration on Tuesday, cautioning against reigniting trade tensions by restoring tariffs on Chinese goods next month. The country also threatened to retaliate against nations that strike agreements with the US to exclude China from supply chains. The warning comes as Washington and Beijing navigate a fragile trade truce established in June, with many details still unresolved. Traders and investors remain uncertain whether the agreement will hold or collapse under renewed pressure. President Donald Trump recently notified trade partners of impending tariff hikes starting August 1, following a temporary delay on most of his April duties. China, initially facing tariffs exceeding 100%, has until August 12 to negotiate a deal with the White House to avoid additional import restrictions. 'Dialogue and cooperation are the only correct path,' stated China's official People's Daily in a commentary. The article, signed under the pseudonym 'Zhong Sheng' (Voice of China), reiterated Beijing's stance that Trump's tariffs constitute 'bullying.' The commentary emphasised that upholding principled positions is essential to safeguarding national interests. It also criticized regional economies considering tariff reduction deals with the US that sideline China in supply chains. Vietnam recently secured a tariff reduction from 46% to 20% for goods transshipped through its territory, many of which originate from China. Beijing warned that it would 'respond resolutely' to any agreements that compromise its interests. The Peterson Institute for International Economics noted that the average US tariff on Chinese exports is now 51.1%, while China's average duty on US goods stands at 32.6%. - Reuters
Malay Mail
an hour ago
- Malay Mail
Trump's latest tariff threat, explained: What it means for Malaysia and 13 other affected countries
TOKYO, July 8 — Donald Trump sent letters to 14 countries, mainly in Asia, informing them that higher import tariffs will come into effect on August 1 unless they reach a deal with the United States. It is the second time the US president has set a deadline after he postponed tariffs on almost all countries in April for 90 days. Countries that have large trade imbalances with the United States have been key targets, including Japan (US$68.5 billion (RM290.3 billion) surplus in 2024), South Korea (US$66 billion), Thailand (US$45.6 billion) and Indonesia (US$17.9 billion). Here is a summary of what Trump's letters mean for these countries: South Korea: Optimistic for a deal South Korea, already burdened by sector-specific levies on steel and automobiles, is facing a 25 per cent tariff hike on its remaining exports to the United States, but is cautiously optimistic of brokering a deal. Washington 'expressed agreement' and 'hoped the two sides could reach an agreement before then (August 1) through close communication', South Korea's national security adviser Wi Sung-lac said after meeting US Secretary of State Marco Rubio yesterday. South Korea, one of the world's biggest shipbuilders, agreed to 'coordinate closely' with Washington on the industry to achieve 'tangible and mutually beneficial outcomes', he said. Japan: Elections, rice and autos A close US ally and the largest source of foreign investment in the country, Japan also has to deal with a 25 per cent levy on its key auto industry. It is now facing similar tolls on other goods, up from 24 per cent announced in April, but better than the '30 per cent, 35 per cent or whatever the number is that we determine' threatened by the president last week. Japan's Prime Minister Shigeru Ishiba said at a cabinet meeting yesterday that the tariff set out in the letter was 'genuinely regrettable', according to local media reports. The reason for not making a deal, he said, was 'the Japanese government has avoided making easy compromises, firmly demanding what should be demanded, protecting what should be protected, and has conducted rigorous negotiations'. Trump has criticised Japan for not opening its market to American rice and vehicles enough. Rice imports is a taboo topic for the Japanese government, which claims to defend local farmers' interests and has taken a hardline approach to talks ahead of an upper house parliamentary election on July 20. Indonesia: Boost US wheat imports Jakarta, facing 32 per cent tariffs, plans to increase its agricultural and energy imports from the United States to finalise an agreement, Economy Minister Airlangga Hartarto recently told AFP. Indonesia had already announced yesterday it had signed an agreement to import at least one million tons of American wheat annually for the next five years, worth US$1.25 billion. Cambodia, Myanmar, Laos: China allies face heavy levies Trump announced 49 per cent tariffs on Cambodia in April, representing one of the highest in his blitz. Yesterday's letter to the country that hosts many Chinese owned factories, reduces this rate to 36 per cent. Prime Minister Hun Manet assured the White House of Phnom Penh's 'good faith' in negotiating, with reduced tariffs on 19 categories of American products. Myanmar and Laos, which both face 40 per cent tolls, rely heavily on Chinese investments, while their supply chains are closely intertwined with Asia's largest economy. Washington has repeatedly highlighted the risk of Chinese products passing through other Southeast Asian countries to avoid US tariffs targeting China, a concern mentioned in Trump's letters. Thailand, Malaysia: Making pledges Thailand was told it faces 36 per cent levies in its letter. Bangkok is offering more access to its market for American agricultural and industrial products, increasing its energy purchases, and boosting orders for Boeing airplanes. Acting prime minister Phumtham Wechayachai told reporters today he wanted a 'better deal', adding that 'the most important thing is that we maintain good relations with the US'. Bangkok's latest proposal aims to grow bilateral trade volumes and reduce its US trade surplus by 70 per cent within five years, achieving balance in seven to eight years, Finance Minister Pichai Chunhavajira recently told Bloomberg News. Thai Airways could commit to purchasing up to 80 Boeing planes in the coming years, according to Bloomberg. Malaysia faces a 25 per cent tariff and the trade ministry said today it will continue negotiations to reach a 'a balanced, mutually beneficial, and comprehensive trade agreement'. Bangladesh: Textiles at risk The world's second-largest textile manufacturer is looking at a 35 per cent tariff on its goods but was hoping to sign an agreement by early July. Textile and garment production accounts for about 80 per cent of the country's exports, and US firms that source products from there include Fruit of the Loom, Levi Strauss and VF Corp — whose brands include Vans, Timberland and The North Face. Dhaka has proposed to buy Boeing planes and boost imports of US wheat, cotton and oil. 'We have finalised the terms,' Commerce Ministry Secretary Mahbubur Rahman told AFP, adding that negotiators were set to meet today to finalise their work. Other targeted countries Kazakhstan (25 per cent), South Africa (30 per cent), Tunisia (25 per cent), Serbia (35 per cent), and Bosnia (30 per cent) are among the other recipients of the letters made public by Trump yesterday. — AFP
