EM LATAM CREDIT: Argentina: Steel/Aluminum Export Tax – Negative

The German trade surplus, contrary to expectations for an uptick, decreased to E14.7bln in July (seasonally-adjusted, vs E15.5bln cons, E15.4bln prior, revised from E14.9bln), the second lowest since May 2023. The decrease came as an exports decline (-0.6% M/M vs 0.1% cons, 1.1% prior, revised from 0.8%) outpaced marginally lower imports (-0.1% M/M vs -1.0% cons, 4.2% prior, revised from 4.1%). Recent trends in the data suggest that German trade is becoming more EU-centric.

• As a % of nominal GDP on a 12-month rolling basis, the trade surplus extended its current downtrend, at 4.8% as of July, 1.1pp below levels seen around a year ago. That compares with a 2015 high of 8.0% and 2022 low of 2.1% (see bottom left chart).
• Across countries and back on a nominal basis, the US continues to stand out with exports to the country collapsing, sitting at their lowest since December 2021 after four consecutive sequential declines (23.5% decline vs March which was underpinned by tariff-front running).
• Exports to China also screen weak, printing the lowest since August 2016 and having declined 26.5% if comparing the last three months to the series' highs. This decline comes against the backdrop of reports (1,2) suggesting China has built significant manufacturing overcapacity in recent years, indicated by domestic supply rising faster global demand, rising numbers of lossmaking industrial firms in the country, as well as declining capacity utilization, which may weigh on demand for German products.
• Exports to and imports to other EU countries both appear to be on a solid uptrend, meanwhile, confidently standing above cycle lows seen around a year ago.
• IFO export expectations deteriorated in August, falling to -3.6 points, from -0.3 points in July. “Disillusionment is spreading in export business [...] although a tariff rate of 15 percent from the US is less than feared, it will nevertheless weaken export momentum”, IFO comments.

President Donald Trump told reporters yesterday, “certain European leaders," will visit Washington on Monday or Tuesday, without naming specific leaders. Trump also noted that he would likely speak with Putin in the coming days. 

• Reuters reports that the EU sanctions envoy David O’Sullivan is in Washington with a technical team to discuss Russia sanctions. EU Council President Antonio Costa said today the EU’s new Russia sanctions are being closely coordinated with the US, per Reuters.
• Bloomberg notes: “Last week, Trump demanded more economic pressure from Europe on Putin, including a total halt to purchases of Russian oil and gas, according to Finnish President Alexander Stubb. The US leader also called on Europeans to apply pressure to China, he said.”
• Kremlin's spokesman Dmitry Peskov told reporters this morning that no sanctions will ever be able to force Russia to change course on Ukraine, per RIA.
• Peskov said: “Europe and Ukraine are doing everything they can to draw the United States into their orbit,” referring to Trump's comments about new sanctions on Russia.
• Military Analyst Mick Ryan writes on his Substack that Russia is engaged in “a large-reinforcement and surge of operations” in Eastern Ukraine.  The acceleration in Russian operations is shown in the "increase in average daily losses,” according to Ryan, suggesting that a ceasefire agreement in the short-term is remote.

Figure 1: Russian Daily Losses, March 2022 – July 2025

Source: Mick Ryan, UK MOD

The US and EU appear closer to coordinating new sanctions on Russia as diplomacy fails to unlock a ceasefire, but political obstacles are likely to undermine the process. On Saturday, Russia launched its largest aerial bombardment of Ukraine since 2022, with a government building in Kyiv hit.

• President Donald Trump told reporters yesterday he is “not happy” with President Vladimir Putin’s intensifying bombardment of Ukraine and obfuscation of a bilateral meeting with President Volodymyr Zelenskyy. He responded 'yes' when asked if he is ready to enact new sanctions.
• Treasury Secretary Scott Bessent told NBC yesterday, “We are prepared to increase pressure on Russia, but we need our partners in Europe to follow.”
• FT reported a short time ago EU officials are in discussions on "potential sanctions against China and other third countries for purchasing Russian oil and gas." According to the report, the measures are "unlikely to be adopted unless the US also targets China’s energy imports," which may be unlikely as Trump administration officials have refrained from measures against China during trade talks. Moreover, as sanctions need EU unanimity, they could be torpedoed by Russia-leaning Hungary or Slovakia.  
• There are also concerns that secondary sanctions on China will not substantially impact crude flows, as demonstrated by China’s trade in sanctioned Iranian barrels. 

Figure 1: Most missiles and drones fired by Russia at Ukraine since February 2022

Source: Sky News, Ukrainian Air Force