Hello there,
While U.S. President Donald Trump hits trade partners with a blizzard of surprises ahead of his Aug. 1 tariff deadline, Big Tech is keeping markets buzzing with results powered by artificial intelligence and big, big spending plans.
Bumper earnings from Microsoft and Meta are easing investor concerns about the frenzied pace of spending on AI. Meta CEO Mark Zuckerberg told analysts that AI was making big leaps possible in its core advertising business and Microsoft’s cloud computing unit got a big revenue boost from its bets on the technology.
Microsoft is now forecasting a record $30 billion in capital spending for the current fiscal first quarter and the company has soared past a $4 trillion market valuation for the first time.
There’s lots of big numbers being bandied about right now. But they may not be all they seem. The 50% tariff Trump is putting on Brazilian goods comes with a long list of exemptions, including big Brazilian exports like orange juice and civilian aircrafts. The 50% levy on copper left out some of the most widely traded forms of the metal, sending U.S. copper prices plunging after investors there had bet on higher domestic prices.
Trump is levying a 15% tariff on South Korea. The headline figure looks like a big win for the United States, but Seoul appears to have defended its non-tariff barriers while keeping its tariff rate on par with Japan and the European Union. South Korea’s pledge to invest $350 million in U.S. projects also includes existing investment plans by South Korean companies.
The trade negotiations were an early test for South Korean President Lee Jae Myung, who took office in June after a snap election. Overall, he appears to have avoided a worst-case scenario. Indian Prime Minister Narendra Modi is not having as smooth a time of it. Trump’s threat of a 25% tariff on Indian exports is being viewed as a diplomatic failure for New Delhi. Modi still has time to turn things around, though. Trump is saying the United States is still negotiating with India.
Trump is meanwhile intensifying his trade war with Canada, after Prime Minister Mark Carney gave Canadian support to Palestinian statehood. Trump is set to impose a 35% tariff on all Canadian goods not covered by the U.S.-Mexico-Canada trade agreement if the two countries don’t reach agreement.
Wealthy American travellers are flocking to Europe this summer – that’s helping European airlines and economies but not everyone is happy. We dive into the overtourism phenomenon on this week’s Reuters Econ World podcast. We get into some of the solutions, including hiding a popular bus route from Google Maps in Barcelona, and top tips from our correspondents on where to go off the beaten track in Japan and Spain. Listen here.
The pace of global rate cuts is slowing as the U.S. Federal Reserve stays cautious about tariff-driven inflation and the European Central Bank nears the end of its easing cycle.
Indeed, as rate cut expectations fade in the United States and trade war fears ease, investor conviction on long-term pain for the dollar and U.S. stocks is crumbling. The dollar is now barrelling towards its first monthly gain of 2025, putting the so-called "rest of the world" trade predicated on the idea of a crisis of confidence in U.S. assets at risk. That could signal pain ahead for assets across Europe and emerging markets that were boosted by this view.
As always, I'd love to hear from you by hitting reply on this email or finding me on LinkedIn.
