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Daily Economic Update
07.08.2025US: Trump doubles tariffs on India to 50%, announces 100% semiconductor import duties but with exemptions. President Trump imposed an additional 25% tariff on Indian imports due to the country’s continued buying of Russian energy products, doubling overall tariffs from the previous 25%, with the new levies set to take effect in 21 days, which allows time for negotiations. So far, the Indian administration hasn’t shown any clear inclination to stop buying petroleum products from Russia. In the six months through June, India was the US’s 10th largest goods importer, accounting for a 3.2% share of total US imports. Trump also mentioned that other nations (including China) that continue to purchase Russian energy products could also face some secondary sanctions, but without providing any further clarity. He also announced 100% tariffs on chips and semiconductor imports, though companies which have existing US manufacturing plants or commit to invest in the US, such as Apple, Samsung, or Taiwan’s TSMC, would be exempted from paying these new duties. Meanwhile, Switzerland (US’s seventh largest importer, with a 4.3% share in 6M25), which was hit with 39% tariffs, saw no relief following the Swiss president’s last-minute visit to the US just before the tariffs came into effect today. Finally, Trump was considering appointing a ‘temporary’ Fed governor to replace Adriana Kugler who resigned before her term was supposed to end in January 2026. Trump may announce a new governor for the interim period within the next few days before finally appointing a permanent one, a potential Fed Chair.
Oil: Prices fluctuate as the US sanctions India for buying Russian oil. The White House’s announcement of imposing an additional 25% if the country continues to buy Russian oil, drew seemingly unexpected reactions in the market. Oil prices moved lower, with Brent declining 1.1% d/d yesterday to settle at $66.9/bbl. Despite what could be technically interpreted as bullish news, markets appear skeptical that these tariffs will eventually come into effect, especially after President Trump described the Witkoff-Putin talks yesterday as “productive”, with a good prospect that he could meet Putin and Zelensky soon. Should a ceasefire be reached between Russia and Ukraine, the likelihood of US imposing additional tariffs on buyers of Russian oil will materially diminish. Also, the 21-day window, i.e. to 27 August, provides room for negotiation in which the US and India could come to an agreement. Limiting the losses yesterday and helping prices open higher this morning in Asian trading, however, was the weekly report from the US Energy Information Administration, which showed commercial US crude and gasoline inventories declining 3 mb and 1.3 mb w/w (in the w/e August 1), respectively, a sign of still solid oil demand, and the possibility, hinted at by Trump, that secondary sanctions could be imposed on other countries buying Russian oil, the largest of which is China.
China: Export growth in July surges ahead of forecast. Chinese goods exports in July rose 7.2% y/y following an increase of 5.8% in June and beating the consensus forecast of 5.4% growth. While exports to the US saw sustained declines (-22% y/y in July), shipments to other countries such as the EU and Asian countries recorded further increases, suggesting that Chinese producers have continued to find new markets amid US tariffs. Recently, the European Central Bank highlighted that continued China-US trade tension could redirect Chinese goods to the EU, providing additional disinflationary impulse. Imports also fared better than expected, rising 4.1% y/y from 1.1% in June and versus the market forecast of a drop of 1%, showing tentative signs of an improvement in domestic consumption.
Eurozone: Retail sales rebound with annual growth at the highest since September. Retail sales rebounded by 0.3% m/m in June (-0.3% in May) but came slightly below the consensus expectation of a 0.4% increase. On a y/y basis however, retail sales expanded by 3.1% (1.9% in May), the highest since September 2024, exceeding estimates. The y/y beat, for the second month in a row, chimes with slightly stronger-than-expected Q2 GDP reported last week. Among the bloc’s three largest economies, Germany (4.8% y/y) and France (2.2%) continued to record higher retail sales growth than Italy (0.4%). Economic growth in the Eurozone should be moderately better in 2025 than in 2024 (0.8%), with the IMF recently upgrading growth to 1% (from 0.8%). However, uncertainty about the outlook remains elevated given the still-fluid trade/tariff impact and the timing/extent of incremental growth tied to higher defense and infrastructure spending.