The week after payrolls is usually quiet for data (key US event on the calendar is the FOMC minutes on Wednesday) so all eyes will focus on Wednesday's 90-day extension to the reciprocal tariffs announced on Liberation Day back on April 2nd. However, there are increasingly suggestions that August 1st might be the new July 9th (see below).
As a benchmark, DB's economists believe the current effective rate is around 15% (same as Morgan Stanley, see chart below), which is obviously a good deal below the implied rate from Liberation Day, but well above the low single figures before Trump returned to office. It is good news for markets that Section 899 (the revenge tax) has been consigned to the history books after not making it into the tax bill. It's also good news that Bessent has recently sounded more positive on the direction of travel in recent talks.
However, with financial conditions easy again and with the S&P 500 back at all-time highs, it wouldn't be a surprise to see the Trump Administration take a tough stance with those who they don't think negotiations are going in the right direction.
President Trump said at the end of last week that by the July 9 deadline, tariffs would be "fully covered and they’ll range in value from maybe 60 or 70% tariffs to 10 and 20%." Then over the weekend he said that he'd “signed some letters and they’ll go out on Monday – probably 12”. Overnight this was firmed up to noon Washington time today.
On Thursday he'd mentioned that the letters could go out on the Friday holiday and apply from August 1st if no deal can be made. This gave some comfort that there could be yet another extension and time to do deals. Bessent has also reiterated over the weekend that some countries would be able to negotiate a three-week extension to August 1st. So maybe we'll just be here again in three weeks when everyone is on the beach apart from the trade negotiators.
For Europe, Bloomberg reported that the union is willing to accept a 10% universal tariff if exemptions for areas such as autos (25%) and steel and aluminum (50%) are provided. For Japan, the mood turned negative last week as President Trump said that they should "pay 30%, 35%, or whatever the number is that we determine, because we also have a very big trade deficit with Japan." On the bright side, Treasury Secretary Bessent said they were "very close" to a deal with India, and on Thursday the US reached a trade deal with Vietnam.
Then overnight Trump posted on social media that "Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff,” This follows a BRICs summit in Rio over the weekend where the group condemned US and Israeli strikes on Iran.
In terms of key events this week, a highlight will be June's FOMC meeting minutes released on Wednesday. Economists expect more details to emerge around the extent of divisions among Committee members. Staying with monetary policy, central bank decisions are due in Australia tomorrow and New Zealand on Wednesday. DB's economists forecast 25bps cuts for both.
So lots of headlines in recent days, stand by for lots more over the next two days, and then likely beyond.
Courtesy of DB, here is a Day-by-day calendar of events
Monday July 7
Tuesday July 8
Wednesday July 9
Thursday July 10
Friday July 11
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Turning to just the US, the minutes of the June FOMC meeting will be released on Wednesday. St. Louis Fed President Musalem and San Francisco Fed President Daly will take part in public speaking engagements on Thursday.
Monday, July 7
Tuesday, July 8
Wednesday, July 9
Thursday, July 10
Friday, July 11
Source: DB, Goldman, Barclays