Trump Threatens New Tariffs on Mexico, EU as Fed Cautions Over Economic “Noise”

Global Sentiment: Risk-off
Factors: Trump Tariff

TODAY’S WATCHLIST
- China June Trade Data
- India June CPI Data

THE BIG STORY
President Donald Trump escalated trade tensions over the weekend, threatening to impose a 30% tariff on imports from Mexico and the European Union starting August 1 after prolonged negotiations failed to produce a deal. In letters addressed to EU Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum, Trump criticised both trading partners for stalling talks and warned that punitive tariffs were imminent. Both the EU and Mexico condemned the move as unfair and destabilising but signalled willingness to continue negotiations ahead of the deadline.

The new tariff threats add to growing uncertainty in financial markets and policymaking circles. Chicago Federal Reserve Bank President Austan Goolsbee said on Friday that Trump’s repeated trade actions are creating “messy” conditions for interpreting the economic outlook. Speaking on the "Moody's Talks: Inside Economics" podcast, Goolsbee noted mounting anxiety among business contacts about a potential surge in inflation, despite current data showing limited evidence of such a spike. “If we, every six weeks, have to revisit whether we’re about to have some big supply shock, that’s messy at the least,” he said, cautioning against premature optimism over a smooth economic landing.

DATA
The US government recorded a $27 billion budget surplus in June, driven by a surge in customs duties, which hit a record $27.2 billion as tariffs introduced under President Trump continued to boost revenue. Monthly receipts rose 13% to $526 billion, while spending declined 7% to $499 billion. However, after adjusting for calendar shifts, the Treasury noted June would have shown a $70 billion deficit. Customs duty collections have now topped $100 billion for the fiscal year, marking a significant milestone. Despite the strong June performance, the year-to-date budget deficit rose 5% to $1.337 trillion, reflecting higher spending on healthcare, Social Security, defence, and interest payments. 

WHAT HAPPENED OVERNIGHT
US stocks indices ended slightly lower on Friday as fresh tariff threats from President Trump reignited trade war concerns, dragging major indexes into negative territory for the week. The announcement of a 35% tariff on Canadian imports weighed on sentiment, with investors bracing for potential retaliation and broader economic fallout. Still, tech giant Nvidia bucked the trend, rising 0.5% to a record high and pushing its market capitalisation to $4.02 trillion. In the defence sector, drone manufacturer AeroVironment surged 11% after US Defence Secretary Pete Hegseth called for an accelerated rollout of drone production, offering a bright spot in an otherwise cautious trading session.

US Treasury yields moved higher on Friday as investors turned their attention to next week’s consumer price inflation report, which is expected to show an uptick in price growth for June. The benchmark 10-year yield rose 7.7 basis points to 4.423%, while the two-year note climbed 4.4 basis points to 3.912%. With the Federal Reserve widely expected to keep rates unchanged, markets are watching closely to see whether fresh tariff-driven price pressures could shift the central bank’s cautious stance in the months ahead.

The US dollar index climbed towards 98 on Friday, a near 1% weekly gain, as investors reacted to a fresh wave of trade tensions and shifting monetary policy cues. The greenback strengthened against major currencies, including the yen and euro, after President Trump escalated his protectionist push with a surprise 35% tariff announcement on Canadian imports, effective 1 August. A similar move targeting the EU appeared imminent, casting doubt over ongoing transatlantic trade negotiations. The dollar jumped 0.79% to 147.4 against the Japanese yen, its strongest weekly performance since early December, while holding flat against the Swiss franc. The euro edged 0.1% lower to $1.1688, as traders reassessed the likelihood of a near-term US-EU trade agreement.

Brent crude oil prices climbed more than 2% on Friday, reversing Thursday’s losses, after the International Energy Agency suggested the market was tighter than surface data indicates. Brent crude rose 2.5%, to settle at $70.36 a barrel, while US West Texas Intermediate gained 2.8%, to close at $68.45. The rally was further fuelled by renewed geopolitical concerns, with US tariffs and the prospect of additional sanctions on Russia raising fears of future supply disruptions. 

Day’s Ledger

Economic Data

• India June WPI Inflation 
• India June CPI Inflation 
• China June Trade Data
• Japan May Industrial Production Data

Corporate Actions

• Earnings: Authum Investment & Infrastructure, Den Networks, HCL Technologies, Infomedia Press, Kesoram Industries, NELCO, Ola Electric Mobility, Rallis India, Sambhv Steel Tubes, SONAM, Tata Technologies, Tejas Networks, 
• Brigade Enterprises to consider fund raising
• H.G. Infra Engineering to consider fund raising
• Satin Creditcare Network to consider fund raising
• Sirca Paints India to consider fund raising

Policy Events

• Eurogroup Meetings
• BoE Governor Bailey Speaks

TICKERS

• KOLTE-PATIL DEVELOPERS’ June quarter collections fell 10.1% year-on-year to ₹5.5 billion. Sales value declined 13.3% to ₹6.16 billion.
• AJMERA REALTY AND INFRA’s sales value for the quarter dropped 65% year-on-year to ₹1.08 billion. Collections grew 42% to ₹2.34 billion, while carpet area sold fell 52% to 63,244 sq ft.
• SULA VINEYARDS’ net revenue declined 7.9% year-on-year to ₹1.183 billion. Adjusted revenue edged up 0.2%. Revenue from own brands fell 10.8% to ₹1.023 billion, while wine tourism revenue rose 21.8% to ₹0.137 billion.
• ASHIANA HOUSING’S area booked increased 34.6% year-on-year to 595,000 sq ft in June quarter. Sales value surged 83.1% to ₹4.31 billion. The company raised ₹1 billion through IFC non-convertible debentures via private placement.
• AVENUE SUPERMARTS’ profit declined 0.1% year-on-year to ₹7.73 billion, while revenue rose 16.3% to ₹163.6 billion. EBITDA increased 6.4% to ₹12.99 billion, though margins narrowed to 7.94% from 8.68%.
• ADITYA BIRLA MONEY’S profit fell 6% year-on-year to ₹0.154 billion. Net interest income declined 10% to ₹0.811 billion.
• NCC received a Letter of Acceptance worth ₹22.69 billion from the Mumbai Metropolitan Region Development Authority for Mumbai Metro Line 6, Package 1-CA-232.
• RITES secured a ₹0.4682 billion Karnataka order to build and renovate government colleges under the PM-USHA scheme.
• WOCKHARDT to exit US generics to focus on innovation-led products. The strategic shift is part of a long-term plan to build a differentiated pharmaceutical portfolio.
• JSW PAINTS launched an open offer to acquire a 25.24% stake, or 11.4 million shares of AKZO NOBEL INDIA at ₹3,417.77 per share, totalling ₹39.29 billion.
• GLAND PHARMA’s Pashamylaram facility received a GMP certificate from the Danish Medicines Agency for aseptically prepared injectables and infusions.
• HFCL’s board approved expanding IBR cable capacity from 1.73 mfkm/pa to 19.01 mfkm/pa at its Hyderabad and Goa facilities. Total capex: ₹1.2555 billion.
• AUTHUM INVESTMENT to acquire 60.95% in Katra Phytosciences and 14.96% in Kerala Ayurveda under agreements with Katra Group at ₹558.65 and ₹171.5 per share respectively.
• IRB INFRASTRUCTURE’S June quarter toll revenue rose 8% year-on-year to ₹16.8 billion.
• BEML board will meet on 21 July to consider a stock split proposal.
• VIP INDUSTRIES’ promoters will sell a 32% stake to new buyers, who will also launch a mandatory open offer for an additional 26%.
• SURAJ ESTATE DEVELOPERS launched Suraj Aureva, a premium residential project in Prabhadevi, Mumbai. Gross development value: ₹1.2 billion. Saleable carpet area: 24,000 sq ft.

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