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Business Standard
30-06-2025
- Business
- Business Standard
Trump's tariffs and tax policies test assumptions on US dollar, markets
By Alice Gledhill, Malavika Kaur Makol and Sagarika Jaisinghani Six months since Wall Street laid out its predictions for 2025, world conflicts and President Donald Trump's turbulent policy making have shattered assumptions about the strength and preeminence of US assets and the economy — leaving market favorites in tatters and conjuring unexpected winners. As foreseen: swings in sovereign bond markets have been sharp, the Japanese yen rallied, and a comeback for emerging markets is finally materialising. At the same time, few envisaged the dollar — the emblem of US exceptionalism — would suffer losses this deep, or predicted the S&P 500's giddying plunge followed by breakneck rebound. Europe's stock market, meanwhile, has morphed from backwater into investor must-have. Here's a look into a group of assets and how they performed so far this year: US dollar Trump's low-tax, high-tariff policies were expected to stoke inflation and reduce the chances of interest-rate cuts from the Federal Reserve — factors seen propelling the dollar's supremacy well into 2025. Instead, a Bloomberg gauge of the currency posted its worst start to a year since at least 2005, and its hegemony is being debated ever more fiercely. The ' Liberation Day' tariffs at the start of April were so sweeping and punitive that they fueled fears of a US recession and fanned speculation Trump was seeking to buoy domestic manufacturing by engineering a weaker dollar. That's a dangerous game: the US depends on foreign investors to buy its mountainous debt pile, and a weaker greenback erodes returns on those bonds. Societe Generale SA, Morgan Stanley and JPMorgan Chase & Co. hadn't expected a turn in the dollar's fortunes in the first half and only predicted gradual slippage later in the year. Now, a JPMorgan team led by Meera Chandan says the greenback's faltering link to rates and equities could be a sign of structural weaknesses. They predict a gauge of the US currency's strength will drop another 2 per cent by year-end. US stocks Investors entered the year with a record high allocation to US stocks, emboldened by a robust economy and bets around artificial intelligence. That optimism was all but abandoned within months, first as Chinese startup DeepSeek challenged the US's dominance in the AI race, and later on fears that Trump's tariffs would tip the economy into a recession. Nearly $7 trillion of market capitalization was wiped from the technology-heavy Nasdaq 100 Index between a February peak and an April low. A Bank of America Corp. fund manager survey showed the biggest-ever drop in exposure to US stocks in March. By early April, US equity bulls were in short supply. But Trump's decision later that month to pause some of the highest tariffs in a century proved pivotal. The S&P 500 hit a record high as data show the economy chugging along and with technology heavyweights in vogue again. After months of ructions and tempered forecasts, Wall Street strategists are taking an optimistic tone on US stocks for the second half. 'I am as bullish on US stocks as ever,' said Marija Veitmane, a senior multi-asset strategist at State Street Global Markets. 'They still offer the best earnings story with the fastest growth and most predictability. Institutional investors restarted buying in mid-April and have not looked back since.' Asian currencies With the Bank of Japan prepared to raise interest rates at a time when peers were cutting, traders started 2025 confident they'd see a rally in the yen. JPMorgan Asset Management and Brandywine Global Investment Management were among those proved right by the currency's almost 9 per cent surge against the dollar to around 145 this year. The yen got a further boost in April from surging demand for haven assets amid the confusion around Trump's tariffs. Jupiter Asset Management's Mark Nash, who positioned for the rally in January, forecasts the currency will climb to 120 per dollar by year-end, an advance of around 17 per cent from current levels. In China, meanwhile, US trade tariffs were expected to hurt the yuan, but so far the dollar's own sharp selloff has upended the prediction. In December, Nomura called for the yuan to weaken to 7.6 per dollar in offshore trading by May, and JPMorgan saw a rate of 7.5 in the second quarter. Instead, the yuan has surged 1.8 per cent this year, hitting 7.1565 per dollar on Thursday — the highest level in seven months — as the People's Bank of China strengthened the daily reference rate. Still, strategists say the yuan will eventually have to fall, given strains in the Chinese economy that may require monetary and fiscal easing in the second half of the year to lift growth. 'China will want to utilize the yuan as a release valve, as well as to maintain competitiveness given the ongoing pressure on the economy and the fact that exports remain the main engine of growth," Barclays Bank Plc strategists Mitul Kotecha and Lemon Zhang wrote in a June 24 note. They see the yuan weakening to 7.20 per dollar by the end of the year, and to 7.25 by March 2026. Global bonds Amid the turbulence, many investors were grateful for one trade that 'saved their bacon,' according to Jared Noering, global head of fixed income trading at NatWest Markets. Short-dated government bonds were expected to perform well, boosted by central bank interest-rate cuts as inflation eased further. In contrast, long-dated bonds were predicted to come under pressure as governments took on increasing levels of debt to plug deepening fiscal deficits and ramped up public spending. Wagers structured around this divergence have largely played out around the globe, including in the US where markets remain on edge over the administration's tax and spending plans. Measures of so-called term premium in longer-dated US Treasuries have soared in an indication buyers are demanding higher compensation for rampant borrowing. Pimco and Allspring Global Investments correctly predicted the divergence in short- and longer-term yields in global bond markets. BlackRock Investment Institute was also correct to underweight long-term Treasuries. European stocks It was hard to find fans of European equities at the start of the year, let alone investors betting they would outshine their US peers. Six months on, fears about a sluggish economy and the threat of tariffs have been offset by Germany's plans to unleash hundreds of billions of euros in defense spending after Trump demanded Europe foots its own military bill instead of relying on the martial heft of the US. As of June 27, the benchmark Stoxx 600 index had trounced the S&P 500 by 16 percentage points in dollar terms, the best relative performance since 2006. The euro has surged to $1.17, bucking widespread forecasts for parity with the dollar in early 2025. Beata Manthey, Citigroup Inc.'s head of European and global equity strategy, was among the rare voices to back European stocks late last year. Targets at JPMorgan and Goldman Sachs proved too cautious. Goldman's chief global equity strategist, Peter Oppenheimer, says much has changed: 'Very aggressive tariffs are not likely to be fully implemented.' Emerging-market comeback Every year since 2017, emerging-market equities lagged US stocks. In 2025, a procession of money managers — with Morgan Stanley among the most vocal — were convinced it was going to be different. And so far the jinx appears to have been broken. A boom in artificial intelligence companies from Taiwan, South Korea and China has helped the equity index. But the overall investment case for emerging markets is underpinned by broad currency strength against the greenback and the perception that the period of US exceptionalism is waning. Emerging markets have added $1.8 trillion to shareholder wealth in 2025, reaching record market capitalization of $29 trillion. Bernd Berg, a strategist at InTouch Capital Markets, expects those inflows to continue thanks to benign inflation and decent growth rates. 'The geopolitical tensions have not derailed this rally,' Berg said. In individual developing markets, Turkey's lira took a hit in March — tumbling to a record low in the space of half an hour — after President President Recep Tayyip Erdogan detained his main political rival. That spooked investors who'd borrowed funds in countries where interest rates were low and plowed the cash into high-yielding lira-denominated assets. They feared the political shock could eventually herald changes in the country's market-friendly economic policy and high central-bank interest rates. While the broader fears haven't materialized, investors are wary, with Pimco among those trimming exposure to Turkish bonds. Meanwhile, the failure of Trump's push for peace between Russia and Ukraine has seen the price of Ukrainian bonds slump. Once a favorite investor bet on a ceasefire, Ukrainian warrants, which have interest payments linked to economic growth, have tumbled since the government defaulted on a payment.
The Sun
09-06-2025
- Business
- The Sun
Taiwan exports to US hit record high as tariff threat looms
TAIPEI: Taiwan's exports to the United States hit a record high in May, official data showed Monday, as the self-ruled island seeks to strike a deal with Washington to avoid hefty tariffs. US President Donald Trump slapped a 32 percent toll on Taiwanese products in April. It was later paused for 90 days, but a global 10 percent levy is still in place. As Taipei and Washington negotiate a trade deal, American companies have ramped up orders of Taiwanese-made high-tech products in case the higher tariff takes effect next month. Taiwanese shipments to the United States soared 87.4 percent in May from a year ago to US$15.5 billion, finance ministry figures showed. Both figures were a record high, Bloomberg News reported. Taiwan's total exports hit US$51.7 billion -- also the highest ever. Shipments of information, communication and audio-video products soared 111.1 percent and electronic parts were up 28.4 percent, the data showed. The overall growth 'was impressive but I would caution that a lot of it is because of export frontloading as the US may still apply tariffs on chips and exempted electronic products,' Michelle Lam, Greater China economist at Societe Generale SA, was quoted by Bloomberg as saying. 'We are bound to see a slowdown later in the year.' Taiwan's government has sought to avoid Trump's threatened levies by pledging increased investment in the United States, more purchases of US energy and greater defence spending. Its trade surplus with the United States is the seventh highest of any country, reaching $73.9 billion in 2024. Around 60 percent of Taiwan's exports to the United States are information and communications technology products, including semiconductors.
Time of India
21-05-2025
- Automotive
- Time of India
South Africa to offer Elon Musk Starlink deal before Donald Trump meet
South Africa 's government plans to offer Elon Musk a workaround of local Black-ownership laws for his Starlink internet service to operate in the country, aiming to ease tensions with both the billionaire and US President Donald Trump . The offer will come at a last-minute meeting planned for Tuesday night between Musk or his representatives and a delegation of South African officials traveling with President Cyril Ramaphosa , according to three people familiar with the discussions. It's meant to defuse the onslaught of criticism by Musk and Trump — who've spread the conspiracy theory that there's a genocide against White people in Africa's most-industrialized nation — before Ramaphosa's visit to the White House on Wednesday, said the people, who asked not to be identified as they're not authorised to discuss the matter. The rand strengthened on the news, advancing as much as 0.7% against the dollar and trading 0.5% stronger at 18 per dollar by 3:21 p.m. in Johannesburg. 'News regarding the Starlink workaround regarding Black-ownership laws for Elon Musk to provide internet services in South Africa have boosted investor optimism regarding a favourable outcome resulting from the upcoming Ramaphosa-Trump meeting,' said Phoenix Kalen, head of emerging-market research at Societe Generale SA. The alternative to so-called Black economic-empowerment laws that in some cases require 30% Black ownership is not specific to Starlink and Musk, the people said. It would be applied to all information and communication technology companies, including those from China and the Middle East, the people said. A so-called equity-equivalent option would instead involve investments in infrastructure or training, or providing Starlink kits to rural areas in order to help improve Internet access. The auto industry in 2019 signed up for a similar workaround that involved the largest car manufacturers — including BMW AG, Ford Motor Co. and Toyota Motor Corp. — setting up a fund to invest in bring disenfrachised groups into the sector. South Africa introduced BEE rules after the end of apartheid, during which Black people were subjugated and excluded from the formal economy by the ruling White minority. Today, White people earn on average five times what Black citizens do, according to official statistics, and own the vast majority of farmland despite making up 7% of the population. The new rules for ICT firms aren't about 'providing access to a single company, but rather part of a broader strategy to create an enabling environment for international investment and expand digital connectivity across South Africa,' the country's Department of Communications and Digital Technologies said in a response to a request for comment. They form part of the government's 'medium-term plans,' it said. Starlink Talks Stall Talks on launching Starlink in South Africa stalled earlier this year after Musk and Trump ramped up public rhetoric against policies such as BEE laws. Musk, who was born in Pretoria, claimed that he was not allowed to operate his satellite service in South Africa 'because I'm not Black' and accused the government of having 'openly racist ownership laws.' Trump has also granted refugee status to minorities in South Africa and criticised a law that gives the government the power to take land for a public purpose. The act is similar to US eminent-domain laws — though the legislation in South Africa allows for expropriation without compensation in certain cases such as land that's been abandoned and state-owned property not in use. For now, the government hasn't seized any land, though millions of people have taken occupation of private and state property — official data show that about 12% of households are situated in informal settlements. Trump twice last week repeated the false claim that White people are subject to a genocide in South Africa. A local court in February ruled that there was no evidence to support the claim, calling the idea 'clearly imagined and not real.' South Africa's talks with Musk over Starlink won't necessarily form part of a proposed larger trade deal with the US, though getting the entrepreneur on board may assist with more positive engagements between the two countries, said the people familiar with the discussions. Starlink's technology, which relies on a constellation of low-Earth orbit satellites, would be a potential game-changer for South African users who've historically faced expensive or unreliable internet options. Only 1.7% of rural households have access to the internet, according to a 2023 survey compiled by the local statistics agency. Also Read: Grok AI's 'white genocide' claims row: All you need to know
Economic Times
20-05-2025
- Automotive
- Economic Times
South Africa to offer Elon Musk Starlink deal before Donald Trump meet
South Africa's government plans to offer Elon Musk a workaround of local Black-ownership laws for his Starlink internet service to operate in the country, aiming to ease tensions with both the billionaire and US President Donald Trump. The offer will come at a last-minute meeting planned for Tuesday night between Musk or his representatives and a delegation of South African officials traveling with President Cyril Ramaphosa, according to three people familiar with the discussions. It's meant to defuse the onslaught of criticism by Musk and Trump — who've spread the conspiracy theory that there's a genocide against White people in Africa's most-industrialized nation — before Ramaphosa's visit to the White House on Wednesday, said the people, who asked not to be identified as they're not authorised to discuss the rand strengthened on the news, advancing as much as 0.7% against the dollar and trading 0.5% stronger at 18 per dollar by 3:21 p.m. in Johannesburg.'News regarding the Starlink workaround regarding Black-ownership laws for Elon Musk to provide internet services in South Africa have boosted investor optimism regarding a favourable outcome resulting from the upcoming Ramaphosa-Trump meeting,' said Phoenix Kalen, head of emerging-market research at Societe Generale SA. The alternative to so-called Black economic-empowerment laws that in some cases require 30% Black ownership is not specific to Starlink and Musk, the people said. It would be applied to all information and communication technology companies, including those from China and the Middle East, the people said. A so-called equity-equivalent option would instead involve investments in infrastructure or training, or providing Starlink kits to rural areas in order to help improve Internet access. The auto industry in 2019 signed up for a similar workaround that involved the largest car manufacturers — including BMW AG, Ford Motor Co. and Toyota Motor Corp. — setting up a fund to invest in bring disenfrachised groups into the Africa introduced BEE rules after the end of apartheid, during which Black people were subjugated and excluded from the formal economy by the ruling White minority. Today, White people earn on average five times what Black citizens do, according to official statistics, and own the vast majority of farmland despite making up 7% of the new rules for ICT firms aren't about 'providing access to a single company, but rather part of a broader strategy to create an enabling environment for international investment and expand digital connectivity across South Africa,' the country's Department of Communications and Digital Technologies said in a response to a request for comment. They form part of the government's 'medium-term plans,' it said. Starlink Talks Stall Talks on launching Starlink in South Africa stalled earlier this year after Musk and Trump ramped up public rhetoric against policies such as BEE laws. Musk, who was born in Pretoria, claimed that he was not allowed to operate his satellite service in South Africa 'because I'm not Black' and accused the government of having 'openly racist ownership laws.'Trump has also granted refugee status to minorities in South Africa and criticised a law that gives the government the power to take land for a public purpose. The act is similar to US eminent-domain laws — though the legislation in South Africa allows for expropriation without compensation in certain cases such as land that's been abandoned and state-owned property not in now, the government hasn't seized any land, though millions of people have taken occupation of private and state property — official data show that about 12% of households are situated in informal twice last week repeated the false claim that White people are subject to a genocide in South Africa. A local court in February ruled that there was no evidence to support the claim, calling the idea 'clearly imagined and not real.' South Africa's talks with Musk over Starlink won't necessarily form part of a proposed larger trade deal with the US, though getting the entrepreneur on board may assist with more positive engagements between the two countries, said the people familiar with the discussions. Starlink's technology, which relies on a constellation of low-Earth orbit satellites, would be a potential game-changer for South African users who've historically faced expensive or unreliable internet options. Only 1.7% of rural households have access to the internet, according to a 2023 survey compiled by the local statistics agency. Also Read: Grok AI's 'white genocide' claims row: All you need to know
Time of India
14-05-2025
- Business
- Time of India
Tariffs ate 61% of fresh loans in China in April
China's new loans slumped sharply and credit expanded at a slower pace than expected in April, as escalating trade tensions with the US harmed sentiment. Financial institutions offered ¥285 billion ($40 billion) of new loans in the month, a drop of 61% from a year earlier to the lowest level since July, according to Bloomberg calculations based on data released by the People's Bank of China on Wednesday. The median forecast of economists surveyed was Yuan 700 billion . 5 5 Next Stay Playback speed 1x Normal Back 0.25x 0.5x 1x Normal 1.5x 2x 5 5 / Skip Ads by Aggregate financing, a broad measure of credit, increased Yuan 1.2 trillion in April, also worse than the Yuan 1.4 trillion estimated by economists. The US hiked tariffs on China drastically throughout April before the two countries negotiated a truce this week that led to the temporary lifting of triple-digit levies. The willingness of companies in China to expand investment deteriorated sharply, with corporate mid- and long-term loans plunging almost 40% to Yuan 250 billion (approximately $35 billion ) in April from a year ago. Live Events "Both household and corporate loans were pretty weak," said Michelle Lam, Greater China economist at Societe Generale SA. "It is quite possible that US tariffs have weighed on private-sector sentiment." Since banks usually aren't in a rush to meet their loan targets at the beginning of each quarter, yuan financing tends to be slow in April. Credit figures in recent months have also been buoyed by the government's push to sell bonds earlier in the year than before, as policymakers sought to stabilise growth with more infrastructure investment. The stockpile of household mid and long-term loans, a proxy for mortgages, returned to contraction in April, indicating more loans were repaid than taken out. That's an ominous sign for the property market, which is struggling to bottom out after years of decline. With the economy pressured by US tariffs, the PBOC has acted to ease monetary policy. At a recent briefing, central bank Governor Pan Gongsheng announced across-the-board rate cuts alongside other steps that could pump Yuan 2.1 trillion into the economy, including a reduction to the reserve requirement ratio.
