Ahead Today
G3: Eurozone Retail Sales, Germany Industrial Production
Asia: Thailand Inflation, Philippines Bank Lending
Market Highlights
US President Trump said his administration will send tariff letters to between 12 and 15 starting Monday, while suggesting that several trade agreements are in the pipeline, even as he declined to identify the recipients of the first batch of his letters. Meanwhile, US Treasury Secretary said with the levies only kicking in officially from 1 August, there is still time for countries that are not close to an agreement to bring offers to the table.
As with the US-Vietnam tariff announcement, we suspect that even if there is an agreement with some countries it will likely be short of details for now and focused more on lower-hanging fruits. Nonetheless, many countries will also be heading into these talks wanting to get a lower rate than the 20% Vietnam received, especially if their exports directly compete with Vietnam, even as they keep a wary eye on demands for higher tariffs on “transshipment” goods. On that front for example, LiveMint reported that a trade agreement with India has cleared the US Trade Representative is awaiting Trump’s approval. If India agrees to US’ demands in agriculture and related sectors, its exports could only face the baseline 10% tariff. Meanwhile, if India refuses, tariffs could go up to 20%, representing a 6% relief from the original 26% reciprocal tariff, but at face value similar to what Vietnam has received. The impact will also depend on what India may get in return including preferential tariffs on additional sectors.
Regional FX
Across the region, Asia currencies traded mixed heading into a possible announcement on new tariff rates. Besides India and Vietnam, the likes of Indonesia is probably closer to a deal based on latest news reports, with Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto saying it is close to securing a “bold” trade deal with the US covering critical minerals, energy, defense cooperation and market access, with a near-zero tariff for over 1700 commodities. Nonetheless, it’s unclear what tariff rate Indonesia may ultimately get. Meanwhile, Thailand has proposed greater market access for US farm and industrial goods, along with increased purchases of energy and Boeing jets, according to Thailand’s Finance Minister Pichai Chunhavajira, in hopes of averting the earlier punitive 36% reciprocal tariff that Trump announced earlier. South Korea sounds like it is further away from an agreement, with South Korean Trade minister Yeo Han-koo meeting with US Trade Representative Jamieson Greer to discuss extending the July 9 deadline even as South Korea is likely to be viewed as negotiating in good faith.
