YOUR DAILY EDGE: 29 July 2025

A Deal Is A Deal! Is It Really?

• EU’s pledge for $250 billion of US energy imports is delusional 
• Donald Trump’s EU oil and gas deal is ‘pie in the sky’, energy experts warn
• EU admits it can’t guarantee $600B promise to Trump
• The White House says aluminum, steel and other metals imported from Europe would be subject to a 50% tariff, not the 15% agreed to in the deal announced Sunday. But European Commission President Ursula von der Leyen said that metal levies “would be cut.” (Axios)
• Japan tries to track US tariff deal progress without written agreement Tokyo worries Trump administration may reimpose higher duties later
• Trump said the Japanese committed to investing $550 billion in America, with the U.S. keeping 90% of the profits. But Japan’s top negotiator Ryosei Akazawa said the nation will invest — at most — 2% of that sum. The rest will come in the form of loans. (Axios)
• Trump announced a U.S.-Vietnam trade deal, in which the nation would be subject to a tariff rate of 20%. Vietnamese officials have acknowledged the existence of a deal, though not the specific terms. (Axios)

Tariff revenue is spiking. Who exactly is paying? (Axios)

Data: Treasury Department. Chart: Axios Visuals

(…) The government generated an extra $20 billion for each of the past two months, which could total $240 billion in additional revenue this year, according to Peter Tchir, head of macro strategy at Academy Securities.

Motor vehicles brought in $3.4 billion, or over 14% of the $24.2 billion in total tariff revenue for May, according to data reviewed by Jason Miller, interim chair of supply chain management at Michigan State University.

• Vehicle parts added $1.2 billion in tariff revenue, while lithium-ion electric vehicle batteries contributed nearly $480 million.

GM disclosed $1.1 billion in tariff costs for the second quarter, which aligns with government data, Miller noted.
European automaker Volkswagen reported a $1.5 billion tariff hit and cut its outlook, citing fallout from Trump’s trade war.

Within autos, “there just isn’t the demand right now in order to justify essentially charging higher rates,” Miller told Axios, which means that companies like GM and Ford may struggle to pass costs to consumers.

There are potential winners and losers in this trade war.

• Industrials are exposed, said David Bianco, chief investment officer for the Americas at DWS, with $1 trillion in managed assets.
• The biggest retailers will “gain market share” because they can negotiate favorable terms with suppliers, while smaller firms will struggle, he told Axios.
• Health care, the worst-performing sector year-to-date, may continue lagging as inflation weighs on consumers.
• Nvidia and other high-margin technology companies with carveouts are less vulnerable, according to Miller.

Who ultimately pays for the tariffs depends on supply and demand dynamics. There are two key factors.

1. Consumer demand: Weak demand means less pricing power, and companies may have to absorb the cost or risk losing customers.
2. Exporter supply: Retailers have more flexibility to shift supply chains, while manufacturers of complex goods are often locked in. Data show retailers more often eat tariff costs than exporters of machines, which require more intricate work and quality control, leaving exporters in a power position on pricing.

Pricing isn’t static. Many companies set prices annually, which means the full effect may not be clear until next year.
“Just like the tariff revenue will accumulate over time, and become a large number, the impact on the economy is likely to be felt over time,” Tchir noted.

Full clarity on who is paying what for tariffs could take a while, but in the near term, it’s clear the automakers are taking a hit.

Also, Stellantis (parent company of Chrysler and other brands) reported a €1.5 billion ($1.63 billion) tariff hit projected for 2025, stating this is directly due to new U.S. tariffs

Helping:

Federal Reserve Bank of Chicago

And:

US Housing Market Posts Worst Spring Selling Season in 13 Years

(…) Fewer sales contracts were signed in the US from April through June than in any year since 2012, according to data from Redfin. That was back when the housing market was still finding its footing after the collapse that fueled the financial crisis. (…)

Prices, however, are unlikely to plunge because sellers are starting to pull listings off the market, limiting inventory, she said.

“We thought we hit rock bottom but we keep discovering there’s more rock bottom to be had,” Zhao said. “You have a lot of people being afraid of what’s to come.” (…)

The rental market is gaining strength because many would-be buyers still can’t afford to purchase, he said. And as borrowing costs remain higher for longer, people have stopped assuming they can buy now and be able to refinance at a later date, according to Ryan.

“The outlook for the housing market is dire,” he said. “Affordability is at its worst since the 1980s. Nothing has changed on that front.” (…)

The fear of missing out has shifted from buyers to sellers, said Angela O’Hare, an agent with Real Broker in the Las Vegas area. It doesn’t help that sellers have to compete with homebuilders offering to subsidize mortgage rates and help cover closing costs, she said.

“Sellers who need to sell will make it happen,” O’Hare said. “I had a listing at $950,000. I cut it down to $799,000 and had three offers.” (…)

“Uncertainty scares some people.”

• Tracking consumers’ views on tariffs

The majority (51%) of adults believe that tariffs are bad for the economy. This has not changed much since May 2025. Similarly, 49% of adults believe that tariffs are bad for their household finances, with 22% having no opinion and 29% believing that tariffs are good for their household finances. Gen Z has become less likely to think tariffs will be good for the economy and for their personal finances, while wealthy consumers are the least concerned about the effect on their finances.

Here and there (via The Transcript):

• Each month, David, we run internal research on our guests that point towards more optimism on travel intent and less concerned about economic worries than both last year and even last month.” – Wyndham Hotels & Resorts ($WH ) CEO Geoffrey Ballotti
• The aggregate spend is holding up. Yes, there’s some pressure in those with lower incomes where we’re targeting some affordability and some special focus on marketing and occasions. So I think the overall outlook continues to be resilient, and we’re investing for growth in that.” – Coca-Cola ($KO ) CEO James Quincey
• “We’ve seen our customer confidence feedback stay high levels and probably get fractionally better versus where we would have been in April. And that certainly — that trend has continued since early July. So we feel really good about it.” – United Rentals ($URI ) CFO Edward Grace
• The consumer tends to be continuing to buy. And we don’t see much evidence of pull forward buying, anticipating inflation or tariffs.” – Hasbro ($HAS ) CEO Christian Cocks

BTW:

China Social Spending Hits Highest Level in Nearly 2 Decades

China’s government spending has pivoted toward social welfare to a degree unseen for at least a generation, as it runs a record budget deficit with a focus on boosting consumption to cushion the blow from Donald Trump’s tariffs.

The latest evidence arrived on Monday, when China announced it will start offering nationwide cash handouts to families as an incentive for couples to have children.

While Beijing is channeling less on-budget investment into infrastructure, expenditure that covers outlays ranging from education to employment and social security climbed to nearly 5.7 trillion yuan ($795 billion) in the first half — the highest for the period since the data series began in 2007.

That represents an increase of 6.4% from a year earlier, according to Bloomberg calculations based on figures published by the Ministry of Finance. Authorities could renew their pledge to prioritize support for domestic demand, as top officials prepare to meet this month to set the economic agenda for the rest of the year while trade talks with Washington continue.

The splurge was almost double the increase in total spending under the general public budget, the first and biggest account among the government’s four fiscal books. Infrastructure-related expenditure in the account — allocated for costs such as environmental protection, irrigation facilities and transportation — was 4.5% less than a year earlier. (…)

Under the new policy of childcare subsidies, the government will spend 3,600 yuan a year per kid under the age of three, according to the official Xinhua News Agency.

Citigroup Inc. estimates a total lump-sum payout of 117 billion yuan in the second half of 2025, while Morgan Stanley puts the program’s annual cost at 100 billion yuan, assuming about 9 million births a year.

Although President Xi Jinping has in the past resisted large-scale handouts to families over what he’s called “welfarism,” China responded in recent months by ramping up government support for households. The goal is partly to bolster domestic demand in the face of US tariffs, which have sent the country’s shipments to the world’s biggest consumer market slumping this year. (…)

Social security and employment saw the biggest gain in spending related to people’s well-being, up almost 8% in the first half from a year earlier. A survey carried out by China’s central bank showed an employment sentiment index hit a record low in the second quarter, illustrating the need for more government aid for job seekers.

Outlays on education increased 5.9% and rose 4% on medical treatment and health care. (…)

Revenue from real estate-related taxes, including deeds and urban land use, fell 5.6% on year in the first half to 975.3 billion yuan.

Provinces earned 1.43 trillion yuan in the period from selling land, a contraction of 6.5% despite a rebound of over 20% in June thanks to market recovery in some big cities. (…)

PBOC Finds Consumer Mood Is Turning Darker Even as Economy Grows

Chinese households became more pessimistic last quarter and their view of the jobs market fell to the worst ever, according to a survey by the central bank, a worry for an economy that risks a slowdown ahead after growing faster than the government’s target for much of this year.

Consumers turned increasingly negative about income, employment, and prices in April-June, the poll showed. The release of the survey results has become unpredictable in recent years, with the data for the first and second quarters published at the same time on Friday instead of at a regular interval as in the past.

The figures throw a spotlight on a worsening vulnerability for China, whose economy powered through Donald Trump’s trade war largely on the strength of its exports. The data also revealed that people’s willingness to consume dropped to the weakest since the outbreak of the pandemic, with almost two-thirds of respondents saying they want to save more, while an employment index fell to a record low.

“The latest data paint a downbeat picture,” Goldman Sachs Group Inc. economists led by Yuting Yang said in a note.

Deepening household pessimism about income and employment likely means that faster retail sales growth since late last year was mostly thanks to government subsidies, instead of improving consumer sentiment. (…)

The data also showed a shrinking percentage of respondents expecting consumer and housing prices to rise. It’s an outlook that spells more trouble for the property sector, which has seen home prices falling since 2022 and continues to erode people’s wealth as the value of their assets drops. (…)

EPA seeks to cancel scientific basis for climate regulations

EPA Administrator Lee Zeldin said Tuesday he’s issuing draft plans to overturn the agency’s 2009 scientific finding that greenhouse gases threaten human health and welfare — a move guaranteed to spark litigation.

It’s President Trump’s most direct effort to rip out climate regulations root and branch — and make it harder for a successor to impose new ones. The “endangerment finding” provides a key legal underpinning for regulating heat-trapping gases from cars, power plants and more under the Clean Air Act.

“This is been referred to as basically driving a dagger into the heart of the climate change religion,” Zeldin said on Ruthless, the popular conservative podcast where he announced the plan. (…)

EPA issued the finding in response to a landmark 2007 Supreme Court decision, Massachusetts v. EPA, which held that greenhouse gases are pollutants under the Clean Air Act.

• The ruling led then-President Obama in 2009 to issue an order allowing EPA to establish emissions standards for sources shown to reasonably affect health and welfare.
• Zeldin has said the decision stipulated that EPA was authorized — but not obligated — to regulate greenhouse gases.

Researchers and environmentalists have warned ahead of the proposal that it conflicts with the scientific consensus on the unfolding harms from climate change.

• “It is callous, dangerous and a breach of our government’s responsibility to protect the American people from this devastating pollution,” the Environmental Defense Fund said ahead of the long-expected plan.
• And Dan Becker of the Center for Biological Diversity said in a statement Tuesday: “By revoking this key scientific finding Trump is putting fealty to Big Oil over sound science and people’s health.”

Zeldin argued that he’s in favor of less pollution, and cast emissions rules as a distraction, saying “this is an economic issue.”

• “We want clean air, land and water. Conservatives love the environment, want to be good stewards of the environment,” he said.
• But he alleged there are people who want to “bankrupt the country” in the name of battling climate change.

Zeldin said the agency welcomes a battle over what he called faulty conclusions about climate harms. The EPA administrator would make the final determination after a public comment period.

• “We’re going to go out to public comment. We’re not afraid of allowing the public to weigh in,” Zeldin said.

Certain legal battles if and when EPA finalizes the draft proposal after the comment period.

• Opponents of EPA’s greenhouse gas regulations “might be able to fast-track their elimination by bringing lawsuits alleging that — without an underlying endangerment finding — the rules are arbitrary and capricious,” ClearView Energy Partners said earlier this year.