Global Economy & Markets, Weekly Roundup 14/07/25
Global equities entered Q3:2025 on a cautious note, due to trade-related concerns
Financial markets developments were closely linked to the news flow regarding US trade policy, as the US government deferred by c. three weeks to August 1st the implementation of “reciprocal” tariffs. Letters to various trading partners were sent in the past week, setting out the tariffs that their goods exports to the US will face, unless a deal is reached by the aforementioned date.
Some economies were set to face higher than previously thought “reciprocal” tariff rates (e.g. Brazil: 50% instead of 10%, European Union: 30% instead of 20%). Canada and Mexico were also notified of tariffs of 35% and 30%, respectively, albeit the trade under the USMCA will probably be excluded, mitigating the bilateral impact.
The four trading partners stated above, represent circa 47% of US imports of goods (total: $3.3 trillion in 2024 and $1.6 trillion in the first five months of 2025 compared with $1.3 trillion for the same period one year ago). Furthermore, the US President Trump announced the imposition of a 50% tariff on copper imports as of August 1st (c. $10 bn in 2024).
As a result, global equity markets were mixed, with risk appetite deteriorating in the last trading sessions. Attention now also turns to the Q2:2025 corporate results season, which kicked-off in the past week and with prominent financials reporting soon (JPMorgan, Citigroup and Wells Fargo on July 15th, Goldman Sachs, Bank of America and Morgan Stanley on July 16th).
US Treasury 10-year yields increased by +8 bps wow to 4.42%, due to tariffs-related concerns of higher inflation. President Trump’s comments regarding interest rate policy under the leadership of Fed Chair Powell, also contributes to higher US policy unpredictability and fixed income volatility.
Meanwhile, European government bond yields also rose, with the 10-year Bund yield in Germany up by +16 bps wow to 2.73%, a 3½-month high, amid media reports of Dutch pension funds being set to sell €125 bn in long-term government bonds due to policy shifts.
On US fiscal policy, the “One Big Beautiful Bill Act” (OBBBA) became law. According to preliminary estimates from the Congressional Budget Office, the OBBBA is set to add further c. $3.25 trillion (11% of GDP) to the primary federal deficit cumulatively in 2025 – 2034 compared with previous laws and with additional burdens due to higher borrowing costs being likely.
Note that the federal fiscal deficit stood at -6.4% of GDP in fiscal year 2024 (i.e. from October 2023 to October 2024), versus an average deficit of -3.2% of GDP since 1962, with the federal debt at 98% of GDP. The path thereafter has been similar, with the federal fiscal deficit in 12-month sum terms standing at $1.9 trillion in June 2025 (6.4% of GDP). In all, the OBBBA exacerbates the existing substantial fiscal challenges as debt levels are already high and increasingly costly.
Higher customs duties collection could stem the deficit-widening impact of the OBBBA. Note that respective revenues were $64.4 bn in Q2:2025 compared with $17.9 bn in the same quarter a year ago, on the back of sharply higher tariff rates. In a hypothetical scenario in which June’s collection ($27 bn) extends each month to September 2025, customs duties would be $188 in fiscal year 2025 versus $77 in fiscal year 2024.
Financial markets developments were closely linked to the news flow regarding US trade policy, as the US government deferred by c. three weeks to August 1st the implementation of “reciprocal” tariffs. Letters to various trading partners were sent in the past week, setting out the tariffs that their goods exports to the US will face, unless a deal is reached by the aforementioned date.
Some economies were set to face higher than previously thought “reciprocal” tariff rates (e.g. Brazil: 50% instead of 10%, European Union: 30% instead of 20%). Canada and Mexico were also notified of tariffs of 35% and 30%, respectively, albeit the trade under the USMCA will probably be excluded, mitigating the bilateral impact.
The four trading partners stated above, represent circa 47% of US imports of goods (total: $3.3 trillion in 2024 and $1.6 trillion in the first five months of 2025 compared with $1.3 trillion for the same period one year ago). Furthermore, the US President Trump announced the imposition of a 50% tariff on copper imports as of August 1st (c. $10 bn in 2024).
As a result, global equity markets were mixed, with risk appetite deteriorating in the last trading sessions. Attention now also turns to the Q2:2025 corporate results season, which kicked-off in the past week and with prominent financials reporting soon (JPMorgan, Citigroup and Wells Fargo on July 15th, Goldman Sachs, Bank of America and Morgan Stanley on July 16th).
US Treasury 10-year yields increased by +8 bps wow to 4.42%, due to tariffs-related concerns of higher inflation. President Trump’s comments regarding interest rate policy under the leadership of Fed Chair Powell, also contributes to higher US policy unpredictability and fixed income volatility.
Meanwhile, European government bond yields also rose, with the 10-year Bund yield in Germany up by +16 bps wow to 2.73%, a 3½-month high, amid media reports of Dutch pension funds being set to sell €125 bn in long-term government bonds due to policy shifts.
On US fiscal policy, the “One Big Beautiful Bill Act” (OBBBA) became law. According to preliminary estimates from the Congressional Budget Office, the OBBBA is set to add further c. $3.25 trillion (11% of GDP) to the primary federal deficit cumulatively in 2025 – 2034 compared with previous laws and with additional burdens due to higher borrowing costs being likely.
Note that the federal fiscal deficit stood at -6.4% of GDP in fiscal year 2024 (i.e. from October 2023 to October 2024), versus an average deficit of -3.2% of GDP since 1962, with the federal debt at 98% of GDP. The path thereafter has been similar, with the federal fiscal deficit in 12-month sum terms standing at $1.9 trillion in June 2025 (6.4% of GDP). In all, the OBBBA exacerbates the existing substantial fiscal challenges as debt levels are already high and increasingly costly.
Higher customs duties collection could stem the deficit-widening impact of the OBBBA. Note that respective revenues were $64.4 bn in Q2:2025 compared with $17.9 bn in the same quarter a year ago, on the back of sharply higher tariff rates. In a hypothetical scenario in which June’s collection ($27 bn) extends each month to September 2025, customs duties would be $188 in fiscal year 2025 versus $77 in fiscal year 2024.