A catch up to trade developments as we look towards European trading

We’re now less than two weeks away from the supposed 9 July deadline for trade deals. But as the White House said yesterday, that deadline isn’t going to be an important one. As things stand, Trump is expected to extend that and kick the can down the road as negotiations continue. Call it TACO. Call it the boy who cried wolf. It’s all the same at this point. The only trade deal he might get between now and then is one involving Pokemon cards (and why not, the market’s been running hot 🔥).

In all seriousness though, markets are already resigned to the idea that trade negotiations will drag on for a few more months. All the US has to show for at this point is half a trade deal with the UK and that’s about it.

The question now is will there even be trade deals at some point? Or will things just get prolonged until a forceful compromise can be found before Trump loses his patience? That is the thing to watch out for.

Right now, even close allies to the US aren’t able to catch a break. See:

• India and US trade talks face roadblocks ahead of tariff deadline – Reuters
• Japan’s Akazawa says Japan cannot accept 25% auto tariffs

And then with the EU, there’s almost zero progress in the three months since Trump’s reciprocal tariffs announcement. The latest is that the EU is trying to work a compromise but if Trump isn’t going to level with them, they won’t be afraid to push back. See:

• EU weighs lowering tariffs on US imports to woo Trump – report
• Macron: If US 10% tariff stays, Europe will respond by imposing an equivalent on US firms

And with regards to China, I’m not sure what Trump is trying to sell here as he touted a “deal” on rare earths. That had to be clarified after by the White House that it was just an “understanding”, with reference to what was agreed upon in Geneva last month. In other words, there is nothing new. And I would expect China to not dramatise this, if at all even, later today. See:

• Trump says just signed deal with China on Wednesday
• US Commerce Secretary Lutnick has said a US-China trade deal was signed two days ago
• US Com Secretary Lutnick announced the deal with China that was reached in Geneva in May!
• White House official dials it all back – its not a deal, its just an ‘understanding’

In any case, China will want to keep this as a bargaining chip surely. So, they won’t compromise all too much on rare earths besides just a gesture of goodwill so that negotiations can continue for the time being. And that’s what it is, not some major “deal” that Trump is saying surely.

So, that’s where we are at heading into European trading today. We’ll surely get more trade headlines before the weekend but don’t hold your breath expecting any major positives. The best positive news now is that talks will continue for longer without Trump going all ballistic and invoking tariffs chaos as per what he threatened in early April.

This article was written by Justin Low at www.forexlive.com.