CROSS ASSET: Bessent Suggests Possible Longer Tariff Truce with China

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• The modest widening in the surplus came as imports (-0.8% M/M) fell by more than exports (-0.1% M/M).
• It sees imports unwind part of the 3.0% M/M increase in June in what was a rare solid reading compared to recent months.
• An important caveat when it comes to digging into import details for domestic demand implications -- the miscellaneous category again shows a surge but this was revised away last month as these unclassified items are eventually correctly allocated.
• Specifically, the miscellaneous category surged 172% from to E6.8bn in Aug from a typical E2.5bn in July, with the latter initially reported at E7.1bn.
• With that in mind, monthly declines are currently seen as being led by the typically volatile raw materials category (-7.5% M/M) along with manufactured goods (-2.8%) and food, drinks & tobacco (-1.8%).
• We tend to focus on machinery & transport within manufactured goods, and this currently shows a disappointing -2.6% M/M to undo a sizeable part of June’s 4.0% increase. In doing so, it crimped annual growth in this nominal category to just 2.5% Y/Y. 

• The Euro area goods trade surplus surprised lower for the third time in four months, with a seasonally adjusted E5.3bn in July (cons E12.0bn expected) after an upward revised but still low E3.7bn (initial E2.8bn) in June.
• The Bloomberg consensus figure again consisted of only three responses, so we wouldn’t put too much weight on the surprise and instead focus on the direction.
• The trend is one of clear narrowing in surpluses, with an average E4.5bn in Jun/Jul, E15.2bn in Apr/May and E24.3bn in Feb/Mar on peak tariff front-running. For a sense of a more ‘typical’ surplus, it averaged E14.1bn per month through 2024.
• Alternatively, it leaves the latest three-month goods surplus worth approximately 0.6% GDP vs a peak of 1.6% GDP in the spring after an average surplus of 1.1% GDP through 2024.
• The more detailed NSA data show that Irish pharmaceutical exports to the US registered a second small month of E2.4bn after just E1.8bn in June. It's continued payback from a surge in Q1 when exports summed to E39bln vs the E44bln through 2024 as a whole. As such, it may not necessarily be surprising but it's still notable and could see similarly small readings ahead with Jan-Jul exports already worth a cumulative E58.7bn.