New York State Manufacturing Activity Weakens Further The index fell to minus 16 this month from minus 9.2 in May
The Federal Reserve Bank of New York said Monday that its statewide manufacturing index fell to minus 16 this month from minus 9.2 in May. A consensus of economists polled by The Wall Street Journal expected it to rise to minus 6.0.
Measures of new orders and shipments declined, the New York Fed said. Input price increases slowed but remained substantial, while selling-price increases picked up, a further potential concern for policymakers worried about a rebound in inflation at the Federal Reserve, which meets this week.
However, employment grew slightly for the first time in several months, the survey said.
While business activity declined this month, firms did turn more positive about the outlook for future business conditions, expecting activity to increase in the months ahead, Richard Deitz, economic research adviser at the New York Fed, said. The index gauging future general business conditions rose above the zero no-change mark for the first time since March.
Trump Officials Weighed Broader China Tech Restrictions Ahead of Trade Talks Expanding export curbs on chip-making equipment was an option if London talks hadn’t gone well
The Commerce Department unit overseeing export controls in recent weeks weighed tougher limits on semiconductors, including cutting off sales to China of a wider swath of chip-manufacturing equipment, people familiar with the matter said. Such a move would have covered equipment used to make everyday semiconductors, expanding beyond existing export limits on equipment for producing advanced chips.
The decision could have roiled supply chains for chips needed to make everything from smartphones to cars, while threatening billions of dollars in sales for leading equipment companies such as Applied Materials, Lam Research and KLA.
The restrictions were discussed as an option if trade talks didn’t go well and are no longer actively being considered, a White House official said. The official declined to say whether they might still be an option down the road. (…)
China accounts for tens of billions of dollars in revenue for Western equipment companies. The country generated roughly 40% of the revenue for Applied Materials, Lam and KLA in their most recent fiscal years. (…)
At a House Committee on Foreign Affairs hearing Thursday, Jeffrey Kessler, the head of Commerce’s Bureau of Industry and Security, said the agency was reviewing “products of strategic significance across the board.”
When Rep. Gregory Meeks (D., N.Y.) pressed Kessler about any additional action on the semiconductor industry with respect to China, Kessler said, “I’m sure we will remain active in that space” and “we need to make sure our controls remain effective.” (…)
- China’s automakers aim for cars with 100% domestic chips from 2026 BYD, Geely and SAIC among those racing to meet Beijing’s ramped-up targets
- US-#Japan yet to reach a trade deal as sticking points remain – Nikkei
The base case here remains that the US has no leverage over China on the tariff issue, as previously discussed here (see In Tariff Negotiations, Trump Has No Ace Up His Sleeve, 29 May 2025).
This is why Beijing made it crystal clear that it will not cut tariffs unless the US made the first move since it is the Trump administration which initiated this trade war.
This has now happened with the commencement of talks between the two sides.
Meanwhile, it has been obvious that the plan of the Trump administration has been to seek to isolate China by agreeing trade deals with more friendly countries, such as Japan and India.
If this pressure means Japan and India may be able to negotiate better deals with the US than might otherwise have been the case, they are unlikely to agree terms that threaten their trading relationship with China.
On that point, China specifically warned in late April that it will retaliate against any country that negotiates trade deals with America “at the expense of China’s interests”.
In this respect, it is a reality that for many countries China is now a more important trade partner than the US.
To be precise, a total of 143 or 71% of countries traded more with China than with the US in 2024, while 107 or 53% of countries traded more than twice the amount with China that they trade with the US, based on IMF’s data on international trade in goods by partner countries (formerly Direction of Trade Statistics).
This compares with 22% and 11% respectively back in 2001 when China joined WTO.
All of the above is why Donald Trump still badly needs an off-ramp before his tariff agenda inflicts too much unnecessary damage on the American economy, evidence of which is likely to show up in data in the next few weeks.
Trump Abruptly Leaves G-7 for ‘Much Bigger’ Reason Than Ceasefire
Donald Trump abruptly exited the G-7 summit in Canada, deepening questions about the US president’s promise to bring peace. The hasty departure fanned speculation that the US might be readying more aggressive support for Israeli Prime Minister Benjamin Netanyahu’s operation, as Israel bombards Iran in a bid to disable its nuclear program. But Trump said it had “nothing to do” with working on a ceasefire between Israel and Iran, and that his reason for leaving was “much bigger than that.”
The early departure meant his meeting with Australia’s leader Anthony Albanese was scrapped. Earlier, Trump and Japanese Prime Minister Shigeru Ishiba failed to reach an agreement on a trade package.
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*PRESIDENT TRUMP GIVES REMARKS TO REPORTERS ON AIR FORCE ONE (Bloomberg)
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TRUMP SAYS EU NOT YET OFFERING A FAIR DEAL ON TRADE
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TRUMP SAYS PHARMA TARIFFS COMING VERY SOON
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TRUMP SAYS HE’S LOOKING FOR BETTER THAN A CEASEFIRE IN IRAN
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TRUMP SAYS MIGHT DO SEPARATE CANADA DEAL FOR GOLDEN DOME
The US president has repeatedly said he is considering new economic penalties on Russia, but has declined to follow through. Asked why he is still waiting, Trump told reporters that he wants to see “whether or not a deal is signed” and expressed concern over the impact imposing sanctions would have on the US.
“Don’t forget, you know, sanctions cost us a lot of money. When I sanction a country that costs the US a lot of money, a tremendous amount of money,” Trump said at the summit in Alberta, Canada. “It’s not just, let’s sign a document you’re talking about billions and billions of dollars. Sanctions are not that easy. It’s not just a one way street.”
Perhaps much like tariffs…
Canadian vehicle production set to drop as U.S. tariffs weigh on sector
The U.S. tariffs on imported vehicles will reduce Ontario auto production by more than 56,000 vehicles this year, with deeper cuts over the next few years that put some plants in jeopardy, a leading industry analyst says.
Joe McCabe, chief executive officer of Pennsylvania-based Auto Forecast Solutions, says there are questions about the future of assembly plants in Oshawa, Oakville and Ingersoll, in addition to expected production cuts in Alliston. (…)
Most of the 1.3 million vehicles made in Ontario in 2024 were exported to the U.S. As recently as 2000, Canadian auto production reached 2.9 million, according to DesRosiers Automotive Consultants. (…)
Exports of Canadian-assembled automobiles to the U.S. fell by 23 per cent in April, the first month of the U.S. tariffs. (…)
“U.S. tariffs are creating worrying vehicle production forecasts for Canada and North America. Shift reductions announced for the fall at GM plants in Oshawa and Ingersoll reflect this trend,” Ms. Payne said. “Trump’s tariffs are also battering sales forecast for vehicles, which hurt the entire North American industry.”
Ontario is home to five automakers – three Detroit-based and two Japanese. (…)
Could Carney let the Chinese in?
Canadian exporters increasingly shift from U.S. to overseas markets
New data from the Port of Montreal confirm Canadian exporters are turning away from the United States toward overseas markets in greater numbers, a rapid shift its chief executive says heightens the urgency to boost investment in marine transport infrastructure.
Among the most startling numbers, Canada’s second-biggest port has logged a 77-per-cent surge in two-way cargo traffic with China over the past few months, with a 22-per-cent gain in outbound shipments to the Asian country, according to information shared with The Globe and Mail. China is now the port’s second-largest export market after India, up from fifth last year, the statistics show.
Cargo volumes from Montreal to Spain are up 147 per cent year-over-year through May, up 11 per cent to the Netherlands, and up 10 per cent to Northern Europe, the numbers show. Port officials say they’ve noticed a particular surge in exports of aerospace and other manufactured goods as well as agricultural products toward Europe. Meanwhile, inbound shipments from Africa have increased 29 per cent this year, notably because of a massive increase in cocoa imports. Traffic from Latin America is strong as well. (…)
China has become the biggest buyer of Canadian oil shipped on the Trans Mountain pipeline and loaded onto tankers on the West Coast. But it’s not entirely clear what is driving the record traffic numbers between the Port of Montreal and the Middle Kingdom at the other end of the country, which port officials say include increased volumes of food and forest products from Canada.
The U.S.-China trade war might explain at least part of it. Some American companies sourcing Chinese goods they sell in the United States have been diverting their wares to Canadian warehouses and hoping to wait out a 145-per-cent U.S. import tariff rate on Chinese goods, The Logic reported in early May. That rate has since been scaled back significantly as the two superpowers try to hammer out a trade deal.
Canada and China have been locked in their own trade fight, triggered by Ottawa’s decision in 2024 to follow the U.S. administration in imposing 100-per-cent tariffs on Chinese-made electric vehicles. Canada also enacted a 25-per-cent tariff on Chinese steel and aluminum, which was met with Chinese retaliatory tariffs on Canadian canola oil and meal, peas and seafood.
But Carney seeks to reopen relations with China…
Trump Tax Bill to Boost Biden’s Chip Tax Credit to 30%
(…) The measure would increase the tax credit to 30% of investments in plants, up from 25%, giving chipmakers further incentive to break ground on new facilities before an existing 2026 deadline. Companies that start projects by the end of next year can continue to claim credits for continuous construction after that date — a policy that’s designed to get sites up and running while recognizing that chip factories take years to build. (…)
President Donald Trump earlier this year called for repealing the Chips Act, but lawmakers in both parties have shown little desire to eliminate subsidies that provide high-paying jobs in their districts, in a sector seen as critical to national security. The Commerce Department, meanwhile, has continued to implement the grant program — while urging larger investments and reworking terms of awards that took months to negotiate. “We’re getting more value for the same dollars,” Commerce Secretary Howard Lutnick said this month. (…)
So far, the Trump administration has secured increases in promised investment from TSMC, Micron and GlobalFoundries Inc. — which the White House has touted as evidence that Trump’s policies are working. None of those included additional Chips Act grants beyond what had already been finalized or proposed. Still, more company spending on projects very likely means more foregone government revenue in the form of tax credits — a number that would grow if the Senate bill becomes law. (…)
Many Exporters No Longer Want Dollars, US Bank Executive Says
When Paula Comings, the head of currency sales for US Bancorp, talks to US importers, she increasingly hears the same message: Their foreign counterparties no longer want to be paid in dollars.
Instead, they ask for settlement in euros, Chinese renminbi, the Mexican peso and the Canadian dollar, looking to limit their exposure to further swings in the greenback.
“A lot of clients previously were reluctant because dollars were sacred in the eyes of the supplier,” Comings said. “Now the vibe from overseas vendors seems to be, ‘Just give us our currency.’” (…)
Some US Bank clients offer a glimpse into this trend. A lumber company from the Midwest now converts its US cash into euros before paying for hardwood imports from Europe — a change from its previous practice of simply sending dollars. The move was spurred in part by a 2% discount offered by its European supplier for making payments in the single currency.
Another client, a homeware retailer that imports from China, renegotiated its terms with suppliers and plans to settle its next bill in yuan. A third customer, a US food company sourcing equipment from Italy, agreed to pay its dues in the common currency, causing it to receive a more favorable rate on a purchase worth €400,000 ($463,120).
“The change is difficult to quantify in real time, but in markets from East Asia to Latin America, a growing number of exporters are opting to denominate contracts in euro, yuan, or even local currencies,” said Karl Schamotta, chief market strategist at cross-border payments firm Corpay in Toronto.
Trade invoices will be one area where the dollar’s dominance comes under pressure, Citigroup Inc. strategists including Dirk Willer and Adam Pickett wrote in a recent note. “We think it will take further ‘trade blocs’ across LatAm and Asia to emerge — possibly encouraged by the US trade war — to see larger shifts away from the dollar in trade invoicing.”
Across the Americas, the currency accounted for nearly all export invoices on average each year from 1999 to 2019, according to the latest data from the International Monetary Fund and the Federal Reserve Bank of New York. In the Asia Pacific region, that figure stood at about 75%. Europe, where intra-bloc trade prevails, saw a significantly smaller share of exports denominated in dollars. (…)
Christine Lagarde in the FT:
We are witnessing a profound shift in the global order: open markets and multilateral rules are fracturing, and even the dominant role of the US dollar, the cornerstone of the system, is no longer certain.
Protectionism, zero-sum thinking and bilateral power plays are taking their place. Uncertainty is harming Europe’s economy, which is deeply integrated in the global trading system, with 30mn jobs at stake.
But the shift under way also offers opportunities for Europe to take greater control of its own destiny and for the euro to gain global prominence. At present, the euro is the world’s second most-used currency, accounting for 20 per cent of global foreign exchange reserves, compared with 58 per cent for the US dollar.
Increasing the euro’s global status would bring tangible benefits: lower borrowing costs, reduced exposure to currency fluctuations and insulation from sanctions and coercive measures. (…)
For the euro to reach its full potential, Europe must strengthen three foundational pillars: geopolitical credibility, economic resilience, and legal and institutional integrity. (…)
The EU is the world’s largest trader — it is the number one partner for 72 countries, representing almost 40 per cent of global GDP. This is reflected in the share of the euro as an invoicing currency, which stands at around 40 per cent. The EU must use this position to its advantage by forging new trade agreements. (…)
Investors seek regions that honour their alliances. Such guarantees have been shown to boost a currency’s share in foreign reserves by up to 30 percentage points. Europe is undergoing a major shift towards rebuilding its hard power, which should also help bolster global confidence in the euro. (…)
Europe must take decisive steps by completing the single market, reducing regulatory burdens and building a robust capital markets union. Strategic industries, such as green technologies and defence, should be supported through co-ordinated EU-wide policies. Joint financing of public goods, like defence, could create more safe assets.
Third, investor confidence in a currency is ultimately tied to the strength of the institutions backing it. Admittedly, the EU is not easy to understand from the outside. But its structured and inclusive decision-making guarantees checks and balances, stability and policy certainty.
Respect for the rule of law and the independence of key institutions, like the ECB, are critical comparative advantages the EU should leverage.
To further drive home these advantages, we must reform Europe’s institutional structure. A single veto must no longer be allowed to stand in the way of the collective interests of the other 26 member states. More qualified majority voting in critical areas would enable Europe to speak with one voice.
History teaches us that regimes seem enduring — until they no longer are. Shifts in global currency dominance have happened before. This moment of change is an opportunity for Europe: it is a “global euro” moment. To seize it and enhance the euro’s role in the international monetary system, we must act decisively as a united Europe taking greater control of its own destiny.
Smart lady, good timing.
SENTIMENT WATCH
BOFA FMS: Global Investor Sentiment Recovers To Pre-Liberation ‘Goldilocks Bull’ Levels (@LiveSquawk)
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– Investor Underweight In US Dollar Largest In 20 Years
– Big Reversal In Recession Odds With Net 36% Saying It Is Unlikely
– Investors: Corporate Balance Sheets In Best Health Since Dec 2015