Tariff storm sweeps the globe: Trump's ultimate test is imminent, central bank data adds fuel to the fire.

After three months of repeated tug-of-war, the global economy is about to face the final judgment day of Trump's tariff policy. This Wednesday, the deadline set by the US President for trade negotiations will be revealed, clearing the mist for the restless markets. With the end of the 90-day tariff deferral period, Trump's so-called "reciprocal taxation" policy will be fully implemented. The US President firmly believes that this protectionist strategy can both reduce the US trade deficit and revitalize the manufacturing industry. However, this unilateral tariff approach is disrupting the global trade system that has been operating under the WTO framework for decades. Trump's trade revolution goes beyond reshaping alliance relationships. As investors worry about the sustainability of US debt, especially after Congress passed a $3.4 trillion tax and spending plan, these tariffs will become a new source of revenue for the treasury. "Funds will flow continuously into the US starting from August 1," Trump declared about his new tariff plan. As the July 9 deadline approaches, negotiators from various countries are making a final push. Treasury Secretary Scott Benett said in an interview on Sunday, "In the next 72 hours, we will not stop." In Benett's blueprint, trade policy, tax cuts, and deregulation collectively form the three pillars of Trump's economic strategy, aiming to unleash investment vitality, promote job growth, and stimulate innovation. So far, the US economy remains resilient, the job market is strong, and inflation is moderate. But the Federal Reserve is staying vigilant under pressure from the President to cut interest rates, closely monitoring the actual impact of the upcoming months' tariff policy on output. Trump's accelerated trade policy reforms in his second term are creating significant uncertainties for the market and corporate supply chain management. From production schedules and inventory management to labor costs and consumer demand, business elites are facing difficult decisions in the rapidly changing policy landscape. Adam Farrar and Maeva Cousin of Bloomberg Economics stated, "Trump is highly likely to escalate threats against trading partners in the coming days to increase negotiation leverage, just as he did with Japan in the past." Although Trump has proudly claimed that "tariffs are my favorite words," his economic understanding is fundamentally flawed - the President has always mistakenly believed that tariffs will be directly paid by trading partners. In reality, the main burden falls on US importers, who must make painful choices between shrinking profits and passing costs on to consumers. Bloomberg Economics estimates that if the July 9 reciprocal tariffs are implemented as planned, the average tariff rate on imported goods in the US could surge from 3% before Trump took office to 20%, casting multiple shadows over the US economic outlook. Central bank policies and data storms are on the horizon Apart from the looming deadline of Trump's tariffs, the coming week will see a series of market-triggering events including the release of FOMC meeting minutes, potential rate cuts by the Reserve Bank of Australia, and economic data releases from various countries. The BRICS leaders summit is also set to begin on Sunday. North America Following the release of the June employment report, the US economic calendar has noticeably slowed down - the report seems to have alleviated the pressure on the Fed to cut rates later this month. Job growth exceeded expectations, mainly due to a significant increase in employment in the public education sector, while the unemployment rate has slightly declined. Economists will interpret the FOMC's June policy meeting minutes on Wednesday, looking for signs of officials leaning towards a rate cut. The following day, regional Fed Presidents Mursellum and Daly and other officials will deliver speeches on the economy. Thursday's weekly initial jobless claims are expected to show that employers are still reluctant to cut staff. Meanwhile, continued claims for unemployment remain high, indicating that job seekers are finding it harder to secure new jobs. On the Canadian front, after the unemployment rate rose to 7% in the previous month, June data could show further weakening in the labor market. Tariffs are suppressing companies' hiring intentions, especially in manufacturing and other trade-sensitive industries. The June report on inbound traffic to Canada is expected to show a continued decline in cross-border tourism. Asia-Pacific battleground This week, Asia will see a flurry of central bank decisions and key macroeconomic indicators that will help determine the region's economic outlook for the second half of the year. Monetary policies in Australia, New Zealand, South Korea, and Malaysia will be in focus as officials balance recent inflation trends with slowing growth momentum. The Reserve Bank of Australia is expected to cut the cash rate to 3.6% on Tuesday, marking the third consecutive cut after easing of inflation pressures. Prior to this, the Australian National Bank's business confidence survey and the ANZ job advertisements data will be released, which will help assess market sentiment and hiring intentions. On Wednesday, RBA Deputy Governor Andrew Hauser will deliver a speech in Sydney titled "Macroeconomic Thinking in Australia." The Reserve Bank of New Zealand is expected to keep the policy rate unchanged at 3.25% on the same day, while the Central Bank of Malaysia will also maintain the overnight policy rate unchanged on Wednesday. The next day, the Bank of Korea may keep the benchmark rate at 2.50% to balance the impact of Trump's tariffs on the economy and prevent a surge in capital city housing prices. Japan will release labor cash earnings data on Monday, with policymakers looking for signs of wage increases driving demand-driven price rises. Additionally, bank lending, current account, and economist surveys will be released. Other regions will also release key economic data: The Philippines will publish May employment reports, Taiwan will release June CPI and trade data, Indonesia will update foreign exchange reserves and consumer confidence data. Europe, Middle East, and Africa In the key events this week, the UK will release GDP data for May on Friday. Economists predict a slight growth after the largest decline since 2023 in April. The Bank of England will release its latest Financial Stability Report on Wednesday, followed by Governor Bailey's press conference. Following the far lower-than-expected decline in German factory orders in May last Friday, Eurozone manufacturing-related data will be closely watched, reflecting the impact of Trump's tariff policy. Germany's industrial production data will be released on Monday, followed by export data from Germany and France on Tuesday, and output data from Italy on Wednesday. European Central Bank officials will have minimal public appearances, but Bundesbank President Joachim Nagel and Executive Board member Piero Cipollone will attend relevant events. Eurozone finance ministers will meet early this week, with the agenda including the issue of Bulgaria's euro conversion rate. Officials will also sign legislation, finalizing the country's status as a new member of the single currency area starting January next year. In the Nordic region, Sweden will release minor inflation data on Monday, house price data on Tuesday, and monthly GDP indicators on Wednesday. Norway and Denmark will also release consumer price data on the same day. Russian policymakers will focus on the inflation data released on Wednesday for June, confirm if inflation continues to ease. The Russian central bank cut rates for the first time in nearly three years last month, with the decision based on slowing price growth. Deputy Governor Alexey Zabotkin said that inflation data will determine whether officials consider cutting rates by more than 100 basis points at the July meeting. Several monetary policy meetings are scheduled in this region: The Bank of Israel is expected to keep rates unchanged for the 12th consecutive time, as policymakers await whether the recent appreciation of the Shekel after a ceasefire with Iran will push inflation back to the target range; The resolution in Romania on Tuesday is expected to keep borrowing costs unchanged, with officials concerned that recent fiscal reforms may trigger another spike in inflation and deter economic growth; Serbia policymakers have maintained rates at 5.75% since September last year, with the latest decision to be announced on Thursday; After lowering rates twice in two months to stimulate economic growth, the Central Bank of Egypt will announce its latest decision on Thursday. May inflation accelerated for the third consecutive month, which could prompt officials to cautiously reduce deposit rates from the current 24%. Inflation turmoil in Latin America This week is the "Inflation Week" in Latin America, with four of the five largest economies in the region set to release inflation data for June: Colombia will kick off the data release on Monday, with the annual inflation rate expected to drop below 5% in June, the lowest level since October 2021, although still higher than the central bank's target range. Chile's data on Tuesday is expected to show a slight or slightly increased change in the annual inflation rate compared to May (4.4%). While this level is still above the central bank's target, policymakers hinted last month that they might soon resume monetary easing if global economic uncertainties remain limited. Mexico will release inflation data on Wednesday, followed by the meeting minutes of the fourth consecutive 50 basis point rate cut at the end of June. Analysts expect the consumer price increase to fall from a slight rebound in May to 4.3%. The meeting minutes will reveal how they view the headwinds faced by the economy that barely avoided recession earlier this year and provide more clues for future easing steps. Brazil, the largest economy in the region, will release data on Thursday, with Bloomberg Economics predicting this will be the first time for the country to surpass its new sustained inflation target. The Central Bank of Brazil raised rates last month again in an attempt to curb inflation exceeding 5% in May. Peru policymakers will hold their latest rate decision on Wednesday, with Bloomberg Economics forecasted to cut rates by 25 basis points to 4.25%, after maintaining rates unchanged at the last meeting. (Translation based on simplified Chinese)