Archive

Tuning Tariff Impact Estimates

• President Trump’s tariff policy seemingly follows a random walk with a drift towards deals. Path dependency raises risks and uncertainty around his volatile whims.
• Corporate avoidance measures have spared their customers from most of the pain, but Vietnam’s deal as a template could belatedly bring more of the pain to bear.
• We assume most countries stay at 10%. The impact of others rising to 20% may be smaller than the anti-avoidance hit, with the total now worth less than 0.4% to UK GDP.

By Philip Rush

HEW: Kicked Can Lands Steady

• Trump kicked the tariff can a few weeks to 1 August, leaving other policymakers and markets in a wait-and-see mode. Pricing was little changed amid little news elsewhere.
• We thematically explored the market implications of resilience rolling cuts later, how healthy the US labour market data is, and dug into the UK’s political problems.
• Next week’s UK labour market and inflation data are critical ahead of an August BoE decision we believe remains finely balanced. US and EA inflation are other highlights.

By Philip Rush

Korea: Policy Rate Held At 2.5% (Consensus 2.5%) in Jul-25

• The Bank of Korea held its base rate at 2.50% as expected, pausing its easing cycle after household loans surged 6.5 trillion won in June and housing prices accelerated in Seoul, demonstrating that financial stability concerns now outweigh immediate growth support needs.
• While economic growth remains subdued with a revised 0.8% forecast for 2025 and trade uncertainty persists, the Committee prioritised evaluating recently strengthened household debt management measures over additional monetary stimulus, signalling a defensive policy stance.
• Future rate cuts remain contingent on financial stability developments and external conditions, with September presenting the next likely opportunity for easing if household debt growth moderates and US-Korea trade relations stabilise.

US Claims Continue To Cruise Calmly

• Rising continuing claims in recent months have been heralded as a canary warning of belated suffering in the labour market. But the problem is ending before it ever began.
• US employment growth is still aligned with its long-run average, and the unemployment rate is unchanged on the year. Openings and quits are also steady with averages.
• The Fed needs excess disinflation to cut, and we believe this won’t materialise. That also avoids demand and policy pressure on the BoE and ECB, helping them hold rates.

By Philip Rush