Here's our summary of key economic events overnight that affect New Zealand, with news mostly about the China-US Geneva 'agreement' and market reactions.
First up, China and the US agreed to cut tariffs on each other by -115%. For the US that means they will go down to 30%. For China, down to 10%. Supposedly the deal is for 90 days to allow further negotiations, but it will likely be endlessly extended. Oddly, China was the only major power to impose reciprocal tariffs and this deal seem to make them a clear winner with the US meeting most of China's demands for de-escalation. Other countries who regarded themselves as friends and who have or are still 'negotiating' with the US are now in a much worse position. That includes neighbours Canada and Mexico, Japan, and of course the EU.
Separately, India who made a big effort to deal with Trump, is spurned, and they have other security reasons to feel offended (justifiably or not).
US merchants will rush to return to China supply. But it isn't clear that China will be doing the same with US products. The US trade deficit with China, already elevated, is likely to surge after this type of 'Trump negotiation success'.
The equity markets liked the retreat and Wall Street took off. The USD strengthened, probably in a way the American's don't want. The bond market sees more risks and increased its risk premium. Gold and bitcoin fell sharply.
The size of the tariff taxes became clear in April with the release of the US Budget Statement. These taxes cost US importers $16 bln in the month an increase of +US$9 bln from a year ago, or +$500 mln/day, far lower than the +US$2 bln/day claimed by Trump. Of course they will now fall from here and it seems will never reach the claimed levels so any budget boost to tackle deficits - a clearly stated policy objective - is likely now in the bin.
The May report from the USDA shows that grain production worldwide is rising while consumption isn't. So prices are falling especially in the US in response to their trade policies. More will be used there as feed grains. Oddly, this report noted lower production and export opportunities for beef but overlooked mention of what is presumed to be a surge in beef imports. They did say dairy production will be lower and imports higher.
Across the Pacific, Chinese vehicle sales came in for April up +9.8% from the same month in 2024. These sales ran at 2.59 mln units an all-time record high for any April. NEVs took a record 47% share in the month. In all this, foreign brands are struggling to get a share, or even keep their share of this expanding market.
The UST 10yr yield is at 4.46%, up +8 bps so far today. The key 2-10 yield curve is flatter at +45 bps. Their 1-5 curve is inverted by only -3 bps. And their 3 mth-10yr curve is more positive at +14 bps. The Australian 10 year bond yield starts today at 4.47% and up +18 bps from yesterday. The China 10 year bond rate is up +2 bps at 1.65%. The NZ Government 10 year bond rate is up +5 bps at 4.56%.
Wall Street has taken off today on the China tariff news, up +3.1% in Monday trade. Overnight, European markets were up too but more modestly with Paris up +1.4% and Frankfurt up +0.3% to bookend these bourses. Yesterday Tokyo ended up +0.4%, Hong Kong was up +3.0% and Shanghai was up +0.8%. Singapore rose +0.7%. The ASX200 ended its Monday session unchanged but the NZX50 rose +0.6%.
The price of gold will start today at US$3223/oz, and down -US$100 from yesterday.
Oil prices are up +US$1 today at just over US$62/bbl in the US and the international Brent price is just over US$65/bbl.
The Kiwi dollar is now at 58.5 USc, down -60 bps from yesterday at this time. Against the Aussie we are down -20 bps at 92.2 AUc. Against the euro we are up +30 bps at 52.8 euro cents. That all means our TWI-5 starts today just under 67.4 and down -20 bps from this time yesterday.
The bitcoin price starts today at US$101,401 and down -2.5% from yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.
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10 Comments
NEVs in China are 60% coal cars.
No different to oil cars.
EVs were always the right answer to the wrong question.
As for the 'markets' - they remind me of lemmings...
Insatiable consumption is ruining the planet.
But there's no money in reducing consumption
And plenty in selling you green workarounds
What would be a better question PDK?
What's the local bioregion's ecological carrying capacity? What would society look like if required to work within that? What would we do to increase it sustainably in perpetuity?
Good question but be careful of the wording (increasing sustainably?).
What is the long-term carrying-capacity of NZ? Ex fossil fuels and fossil feedstock (Haber Bosch, plastic), I reckon we would be doing very well indeed to support 2 million. The Maori got to 150,000 from memory - and post-battle energy deficit saw them eating fresh protein... We have some knowledge more than them, if we don't lose it in this last great effort to pursue GROWTH.
The interesting factor is the amount of already-built stuff available, some of which can be adapted/jury-rigged/nursed for maybe a century - but it will be a declining pathway, as will soil quality I suspect. Climate may have an impact on food-production too, as may pathogens. Resilience and buffering will be important.
Dissipation is hard to parry (we don't, currently; we run a linear take/use/dispose mode which is, of course, temporary). We'll be working hard...
The US will slash its tariffs on Chinese goods from 145 per cent to 30 per cent for the next 90 days, and China will cut its tariffs from 125 per cent to 10 per cent.
Five months ago, the idea that the US would impose a 30 per cent tariff on China would have filled investors with dread. But a lot has changed since then.
The virtual embargo on US-Chinese trade has rightly rocked markets and the economies of both nations. A 30-per-cent tariff will still mean a major realignment of global supply chains, a hit to company profit margins and share prices and no real resolution to the geopolitical tensions US President Donald Trump has inflamed in his first four months in office.
Up down up down up down......pop. Just a matter of time before one of the biggest downs of all.
The values in the market don't mirror reality.
So depending on how you look at things, it's been going down for a while now, and not really recovering.
DC, why do you claim that other countries who did not impose reciprocal tariffs on the USA, like Mexico, Canada, Japan and the EU, are worse off than China?
So who conceded what, in the Sino-American negotiations? (The Bloomberg article is paywalled).
Vietnam have done sweetheart deals with the Trump organisation and Starlink to try and smooth out their trade negotiations.
Looking forward to hearing about Trump Tower Shanghai and the new Trump resort in Macau to explain this capitulation.
https://www.reuters.com/world/trump-organization-eyes-multi-billion-dol…
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