3 days ago

Weekly Macro Brief: Chinese Economic Data, US Inflation, Tariff

Highlights this week include Chinese economic data points, UK CPI, US CPI, PPI, and Retail Sales. Inflation data is key, as it comes ahead of the Fed's meeting on July 30th, 2025.
Market participants, including institutional investors and futures brokers like EdgeClear, will be scrutinizing these data points closely to monitor global growth and underlying inflation pressures.

Fed speakers are scheduled throughout the week. With increasing calls for Fed Chair Powell voluntary resignation and impeachment, the US administration desiring lower rates, the Fed’s independence and credibility to carry out its dual mandate is at risk. It will be interesting to monitor who folds first. Last week’s FOMC minutes revealed a divided Fed on the interest rate outlook, affirming its June dot plot.

On the fiscal policy front, we are already witnessing a shift in global trade policies, with many nations making concessions to negotiate trade deals with the world’s largest economy. In our analysis, the inflation impact of tariffs may not show up until Q4 2025 or early 2026, as tariff threats are mostly used as a lever to negotiate deals. While effective tariff rates have increased, as Trump reshapes how tariffs are viewed, cost pass-through to consumers will be limited in Q3 2025, as companies’ front-loaded inventory helps mitigate the risks of increased tariff exposure.

So, what we have is an interesting development shaping up where, while inflation may rise and remain sticky, it is yet to be seen whether slowing consumer spending will weaken enough to the point where companies have to start offering discounts, which would nullify the tariff risk to the end consumer and result in companies absorbing all tariffs. This scenario will see reduced earnings margins leading into the last quarter and early 2026. However, it will materially reduce risks of higher inflation.

In summary, the complex interplay between tariffs, inflation, and consumer behavior presents critical considerations for traders. EdgeClear, as a dedicated futures broker, remains focused on equipping clients with the insights needed to help navigate this evolving macroeconomic environment.

Overnight Data Recap:
• Chinese Trade Balance (CNY)(Jun) 826.0B (Prev. 743.6B)
• Chinese Trade Balance USD* (Jun) 114.77B vs. Exp. 109.0B (Prev. 103.22B)
• Chinese Imports YY* (Jun) 1.1% vs. Exp. 1.3% (Prev. -3.4%)
• Chinese Exports YY* (Jun) 5.8% vs. Exp. 5.0% (Prev. 4.8%)

Key Economic Releases:

• MON: EU 90-Day Retaliatory Pause Ends
• TUE: OPEC MOMR, Chinese House Prices (Jun), Retail Sales (Jun), GDP (Q2), EZ Industrial Production (May), German ZEW (Jun), US CPI (Jun), NY Fed Manufacturing (Jul), Canadian CPI (Jun)
• WED: UK CPI (Jun), EZ Trade (May), US PPI (Jun), Industrial Production (Jun)
• THU: Japanese Trade Balance (Jun), EZ Final HICP (Jun), US Export/Import Prices (Jun), Weekly Claims, Philadelphia Fed (Jul), Retail Sales (Jun)
• FRI: Japanese CPI (Jun), German Producer Prices (Jun), US Building Permits/Housing Starts (Jun), Uni. of Michigan Prelim. (Jul)

China GDP / Retail Sales/ Housing (TUE):
• Q2 GDP is expected to slow to 5.1% Y/Y (vs 5.4% in Q1) and 0.9% Q/Q.
• Retail sales have been resilient, but industrial production and investment show signs of weakness; deflation and labor market concerns persist.
• Property prices continue to decline, fueling stimulus speculation; policymakers remain cautious, with only modest easing expected (LPR and RRR cuts in Q4).

US CPI (TUE)
• June CPI expected at +0.3% M/M headline and core, suggesting a modest rebound from May’s subdued figures.
• Inflation impact from tariffs seen as temporary; Fed officials maintain a cautious stance with possible rate cuts only if price pressures stay benign.
• Markets are pricing near-zero odds for a July rate cut, but still expect two 25bps cuts by year-end in line with Fed guidance.

US Retail Sales (THU):
• Headline June retail sales expected flat M/M; ex-autos expected to rise +0.3%, showing signs of consumer stabilization.
• BofA data shows mild spending rebound, though discretionary service spending continues to weaken, especially among lower-income households.
• Spending strength remains concentrated in higher-income cohorts; weakness in wage growth limits broader consumption momentum.
US Trade Tensions – Tariffs & Negotiations:
• Trump announced 30% tariffs on EU and Mexican goods effective August 1st, separate from sector-specific tariffs.
• Trump stated the EU is engaging in talks and South Korea is also pursuing a trade deal.

Mexico Response:
• President Sheinbaum expects a deal before August 1st but reaffirmed Mexican sovereignty is non-negotiable.
• Mexico’s Economy Ministry is negotiating to protect domestic firms and workers, aiming for an alternative resolution.

EU Response:
• European Commission President von der Leyen warned that 30% tariffs would disrupt key transatlantic supply chains.
• The EU will extend suspension of countermeasures until early August but is prepared to respond proportionally if needed.
• The EU prefers a negotiated solution and dropped plans for a digital tax, seen as a concession to US tech interests.
• Separately, the EU is drafting a broad corporate tax on firms with turnover above EUR 50 million to support its budget.

EdgeClear

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EdgeClear

EdgeClear
P: 773.832.8320
Derivatives trading involves a substantial risk of loss. Past performance is not indicative of future results. Any example trades are not inclusive of fees and commissions.

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