NAB Morning Call Zen and the Art of Trade Realignment
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Jul 7, 2025 New tariffs target Japan, South Korea, and South Africa, igniting discussions about their effect on international trade and market responses. Mild reactions in US equities raise questions about imminent economic shifts. The impact of the Federal Reserve's policies is scrutinized, especially regarding rising debt costs and GDP growth. Meanwhile, surprising industrial growth in Germany and trade talks between the EU and US weave into the global economic narrative. Business confidence insights ahead of the RBA meeting reveal the balancing act of inflation and rate expectations.
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Mild Market Response to Tariffs
- The US is imposing tariffs close to previously established Liberation Day rates with extensions delaying enforcement to August 1.
- Market reactions remain mild as investors anticipate further negotiations and clarifications before implementation.
Tariff Rates Linked to Trade Surpluses
- Countries with US trade surpluses like Australia likely retain a 10% tariff, while others face closer to 20% baseline tariffs.
- This framework helps anticipate future tariff impacts and trade adjustments.
Extra Tariff for BRICS Alignment
- Trump announced an extra 10% tariff on countries aligning with BRICS' anti-American policies, though those policies remain undefined.
- This introduces new uncertainties, influencing currency and trade dynamics globally.