GLOBAL MACRO: Sharp Narrowing In US Deficits With China, EU & Canada
In line with global export growth peaking in March, US data shows that its trade deficit peaked at the same time. Countries front loaded shipments to beat the early April reciprocal tariff announcement. Ship tracking data for May show that the number of container vessels moderated, and consistent with this the US June visible trade deficit fell to its lowest in over two years. Given the bringing forward of shipments, the data is going to be difficult to interpret over H2. It will take time to see what the impact from the increase in the US effective tariff rate to around 16% will be on the deficit.
- Bilateral balances have generally turned over 2025. The deficit with Canada narrowed around $2.1bn in June from March but almost $10bn since January, China’s $8.4bn and $22.2bn respectively and the EU’s $37.6bn and $13.4bn.
- Looking at Asian trends, the 12-month sum of the US deficit with Japan has stabilised, narrowed with China and Korea, but deteriorated with India and especially Taiwan.
US merchandise trade deficit $bn 12mth sum
- The monthly deficit with Taiwan has consistently widened over 2025 as negotiations with the US took place. Its reciprocal tariff was reduced to 20% from 32% but uncertainty over its key chip shipments continues. The number of ships leaving for the US has moderated since late July but remain around the recent average.
- US imports growth peaked in March at 32.3% y/y and fell 0.2% y/y in June driven by sharp declines from its main trading partners. Imports from Canada fell 13.7% y/y, 6.3% from the EU but a sharp 44.5% from China.
- There also seems to have been a frontloading of US exports with growth peaking at 10.8% y/y in April as firms were likely concerned about retaliation. This has moderated since with June only 3.4% y/y.
US merchandise imports y/y%
Source: MNI - Market News/LSEG
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JGBS: Bear-Steeper Holds At Lunch, US Tariff Letters To Go Out Today
At the Tokyo lunch break, JGB futures are slightly weaker, -6 compared to the settlement levels.
- Japan's weak wage data released Monday shows that it is becoming more difficult for the Bank of Japan to pursue interest-rate increases. Inflation-adjusted wages fell 2.9% on the year in May, compared with a 2.0% drop in April. With trade negotiations between the U.S. and Japan seemingly stuck and Washington threatening to impose even higher tariffs on Japanese goods, the economic outlook is "incredibly challenging," says Moody's Analytics economist Stefan Angrick. (DJ via BBG)
- Cash US tsys are flat to 3bps richer in today's Asia-Pac session after resuming trading following the long weekend.
- US President Trump has posted via Truth Social that the US will start delivering letters outlining tariff levels to various countries starting 12pm Monday, US eastern time. Trade deals will also be announced at the same time. Focus will be on tariff levels, particularly after Trump remarks late last week, where he stated tariff levels could be as high as 60-70% (although further details weren't provided).
- Cash JGBs are flat to 6bps cheaper across benchmarks, with a steeper curve. The benchmark 5-year yield is 0.7bp higher at 0.978% ahead of tomorrow’s supply.
- The swaps curve has bear-steepened, with rates 1-3bps higher. Swap spreads are generally tighter.
AUSSIE BONDS: Slightly Stronger, Job Ads Point To Resilient LM Conditions
ACGBs (YM +1.0 & XM +0.5) are slightly stronger, but the ranges have been narrow.
- The ANZ June job ads print was +1.8%m/m, after a revised fall of 0.6% in May (originally reported as a -1.2% decline). In y/y terms, jobs ads are -0.4%. At the start of the year, we were at -13.7%. This was the best m/m increase for the index since Sep last year. It points to continued resilience in terms of labor market conditions.
- Cash US tsys are flat to 3bps richer in today's Asia-Pac session after resuming trading following the long weekend.
- US President Trump has posted via Truth Social that the US will start delivering letters outlining tariff levels to various countries starting 12pm Monday, US eastern time. Trade deals will also be announced at the same time.
- Cash ACGBs are 1bp richer with the AU-US 10-year yield differential at -15bps.
- The bills strip is little changed.
- RBA-dated OIS pricing is slightly softer on the day across meetings ahead of tomorrow’s RBA Policy Decision. A 25bp rate cut this week is given a 93% probability, with a cumulative 78bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- Notably, today’s moves leave meetings pricing 15-32bps softer than levels before the May 20 RBA Meeting.
FOREX: Trump BRICS Tariff Threat Weighs On Risk Sentiment
The USD is supported post Trump headlines which threaten to impose an additional 10% tariffs on counties that align themselves with anti-American policies of the BRICS group. The Truth Social Post was: ""Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy."
- USD/CNH has risen back above 7.1700, but is only 0.15% weaker in CNH terms versus end Friday levels. We are also still sub the 20-day EMA resistance point at this stage.
- USD/ZAR is up close to 0.50%, last near 17.67. This is only marginally above recent lows in the pair close to 17.50.
- AUD and NZD are off around 0.50% in the G10 space, with the latest Trump comments adding to the risk off mood and uncertainty around trade/tariff outcomes. AUD/USD was last near 0.6525, NZD/USD is back to 0.6025/30.
- US equity futures are holding weaker, down 0.40% for Eminis. Yen is also sifter, giving up earlier gains, last back to 144.75/80.
