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Inching Towards a Truce: US-China Trade Dynamics Evolve

Markets welcomed a tentative step forward in US-China relations, with President Trump announcing a partial rollback of proposed tariff hikes, reverting to a baseline structure of 55% comprising 10% reciprocal tariffs, 20% fentanyl-related levies, and the 25% tariff legacy from his first term. The deal is reportedly in its final stages, pending formal endorsement from both Presidents Xi and Trump.

Yet optimism remains tempered. US Commerce Secretary signalled a hard line on tech exports, stating unequivocally that the US will “not give China their best chips.” This underscores a bifurcation in global supply chains that markets are increasingly pricing into cross-border trade dynamics.

Middle East Escalations Overshadow Asia Relief

Geopolitical nerves flared anew as the US began withdrawing diplomatic staff in the Middle East amid faltering nuclear negotiations. Washington was reportedly warned of a potential Israeli strike on Iranian nuclear sites, triggering a sharp response in oil markets. Brent crude surged between 7-9 % intraday, while risk assets sold off as investors repositioned into defensive stances.

Policy Chess: Bessent Talks Trade, Teases Fed Rumours

Testifying before the House on budget and trade priorities, US Treasury Secretary Scott Bessent hinted at a possible delay to President Trump’s July 8 tariff deadline, citing ongoing negotiations with major economies. At the same time, he made a vigorous pitch for the so-called “Big Beautiful Bill”, aimed at revitalizing US industrial competitiveness.

Speculation around Bessent being groomed to succeed Fed Chair Jerome Powell gathered steam, only to be quickly downplayed. Bessent publicly reaffirmed his commitment to remain at the Treasury through 2029. Meanwhile, following softer than expected US CPI data, President Trump once again pressured the Fed to slash interest rates by “one full point”, citing the unsustainable burden of elevated debt servicing costs.

Digital Assets: Institutions Step In

Crypto continues to attract institutional flows:

GameStop’s 1.75 billion dollar convertible senior note offering may include Bitcoin allocation, as firms turn to crypto for balance sheet diversification.

Ethereum ETFs saw 18 straight days of net inflows, while validator queue participation continues rising, underscoring conviction in ETH’s yield framework.

Solana ETFs may soon follow, with the SEC requesting S-1 amendments, hinting at potential approval within weeks.

Crypto M&A and IPO activity has picked up, reflecting renewed venture and strategic interest.

Despite a modest pullback, macro conditions remain constructive for further institutional engagement and capital deployment into digital assets.

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