Insight Focus
A delay in US-China tariffs has been agreed, raising market spirits. But due to the hugely interlinked global trading system, there are likely to be massive fallouts from the saga even if a long-term agreement is reached. New alliances are already being formed as older ties are strengthened.
China and US Talk Trade
The US and China seem to have come to an agreement to pause significant tariffs for a period of 90 days as the trade war surprisingly de-escalated this week. Instead of the US imposing tariffs of 145% on Chinese goods and China imposing 125% on US goods, the countries have each reduced the amounts by 115%.
For now, the US will charge 30% on Chinese goods entering the country, while China will impose levies of 10%.
The news will come as a relief to US importers who have been caught up in the uncertainty. According to reports, the first shipping containers carrying Chinese products subject to the 145% tariffs began arriving in US ports this week. It is unclear whether the higher rate will still apply to these goods.
According to Vizion data, US export bookings have largely remained stable, but US to China bookings have plummeted.
Source: Vizion
The news of a pause on tariffs also comes at an opportune time as the economies of both the US and China are suffering. Chinese deflation is worsening, April data shows.
Source: National Burea of Statistics of China
Major retailers in China such as JD.com, Tencent and Douyin are stepping up efforts to sell goods originally destined for the US to domestic markets creating a ferocious price war with some items discounted by as much as 55%.
But Wendy Cutler, former acting deputy US trade representative during the Obama administration warned that China’s tolerance for pain is a lot higher than that of the US in an interview with CNBC. The US’ GDP contracted in the first quarter for the first time since 2022. Although this marks a period before the tariffs were imposed, it does not bode well for President Trump’s first period in power.
Source: Bureau of Economic Analysis
UK in First US Trade Deal
But the accolade for fastest trade deal with the US goes to the UK, which secured a new deal with the US immediately after inking an agreement with India. The primary issues of the US-UK deal include steel, cars, ethanol and beef.
The UK government has stressed that UK food standards will not be lowered for US products, but UK farmers are concerned that hormone-treated beef could still enter the UK food supply. Critics say that there are no processes in place that could determine whether imported beef contains hormones or not. Poultry – which is treated with chlorine in the US – will not be included in the agreement.
There are also concerns for the UK bioethanol industry given that the UK will offer a preferential zero duty rate on up to 1.4 billion litres of US ethanol. UK ethanol demand is around 2 million tonnes, which is primarily supplied by UK-based companies.
But this may be the only silver lining for US farmers in the next four years as NGO Food and Water Watch warned that this group is extremely vulnerable to the impact of trade wars.
EU Unveils Countermeasures
As the UK cosies up to the US, it seems that the EU has less patience for the threatened tariffs. Last week, it launched a consultation on potential countermeasures for the US in the event that trade negotiations fail. A list was released containing EUR 95 billion (USD 105 billion) of goods, including meat and animals, fish and seafood, fruit and vegetables, grains and oilseeds.
As of 2023, the value of US-EU trade in goods and services was EUR 1.6 trillion.
Source: European Commission
In the same week, the EU renewed its pledge to completely phase out Russian gas by 2027. It plans to reduce overall gas usage by between 40 and 50 billion cubic metres between now and then, helping it to remove Russian gas from its supply. It estimates it will import 36.5 billion cubic metres in 2025, down from about 150 billion cubic metres in 2021.
Source: European Commission
More Import-Export Disruption
In more bad news for Mexico (and US consumers), the federal government has threatened to terminate an agreement known as the US-Mexico Tomato Suspension Agreement (TSA). As the name would suggest, this agreement suspended anti-dumping duties on Mexican tomato exports to the US.
However, the government is now threatening to overturn the agreement, meaning Mexican tomatoes would be subject to a duty of 21% from July 14. The administration argues that the agreement disadvantages US tomato farmers.
Critics of the move include the Texas International Produce Association (TIPA), which argues the US needs access to more fresh produce. The Fresh Produce Association of the Americas (FPAA) also urged the government to “negotiate a new tomato agreement that supports the innovations of US importers, continues to fill the demands of US consumers, and that helps domestic growers improve their ability to compete.”
A study by Texas A&M estimates that 46,936 US jobs are sustained by Mexican tomato imports, which have an economic impact of USD 8.3 billion per year.
Source: Texas A&M
Brazil, China Forge Stronger Ties
The US trade war seems to have pushed China and Brazil even closer together as Brazil emerges as one of the big winners of the disruption. It is one of the US’ biggest competitors in the export of agricultural goods and, with a massive importing country on side, it seems that there are positive prospects for Brazil.
This week, Brazilian President Luiz Inacio Lula da Silva, or “Lula” was one of three Latin American leaders to fly to Beijing to meet with President Xi Jinping and pledged “indestructible” links with the Asian megapower.
One positive development for Brazil is the resurrection of talks over a mega railway that will crisscross from the East to the West of the continent, connecting Peru and Brazil. The project has been in discussion for decades, with talks long stalled — but China’s ambition to develop alternative trade routes in the Americas could well be the catalyst needed to revive them.
Brazil’s Planning Minister Simone Tebet said last week that there have been new meetings over the future of the project, which would eventually link Chancay Port on Peru’s Pacific coast to Ilheus port in the east of Brazil.
The 1,527km East-West integration corridor (FICO) from Barreiras to Ilheus has already begun construction. A 35-year concession for the first 537km section was awarded to Bahia Ferrovias in 2021.
In another sign that Brazil is emerging as a winner of the trade war, China is importing more agricultural products from the Latin American country. China’s imports of wheat flour have consistently outpaced the five-year average across the second half of 2024 and the first four months of 2025.
Source: Comex
New (and Ongoing) Geopolitical Hostilities
After a few years of wars across the globe, a new hotspot has emerged as tensions boiled over between India and neighbouring Pakistan. Just as the hope was building of a return to the Red Sea after a deal was brokered between the US and the Houthis, news of an Indian missile launch on Wednesday surprised onlookers.
Source: CFR Global Conflict Tracker
The attack was reportedly in response to an alleged Pakistani militant attack in Kashmir that killed 26 people. By Saturday though, both sides had reached an initial (fragile) peace deal with the help of the US, with most speculators agreeing that impacts on wider markets will be limited.
But in the Black Sea, all eyes are on Turkey – the location of a planned meeting between Presidents Putin and Zelenskyy this Thursday. While Zelenskyy has welcomed the meeting, Putin has remained tight lipped on whether he will attend – and his absence could indicate a reluctance to negotiate over peace.
Maersk Doubts US Manufacturing
Shipping group Maersk has expressed concerns over the trade war, revealing that container volumes dropped up to 40% between the US and China in April. CEO Vincent Clerc cast doubts over the US’ ability to return to a manufacturing powerhouse, citing labour shortages and high costs.
Drewry’s world container index showed that the rate for the Shanghai to Los Angeles route dipped to USD 2,713 on May 8, down 32% year over year.
Source: Drewry
US Egg Prices Finally Fall
US consumers are gradually becoming more willing to pay higher prices for food, according to a Numerator report. The average price that buyers are willing to pay for a dozen eggs rose to USD 5.56 from USD 4.90 in January.
But scrutiny is tightening on producers, including Cal-Maine Foods, which has battled with a bird flu outbreak that has decimated its poultry stocks to the tun of about 150 million chickens since 2022. The company reported record profits of USD 508 million in its third quarter 2025 filings, prompting the Justice Department to launch an investigation.
Egg prices finally began to fall in April after a sustained rise.
Source: St Louis Fed
Screwworm Outbreak in Mexican Cattle
As Europe struggles to contain Bluetongue virus, the lethal pest screwworm has been detected in Mexican cattle, prompting the US to suspend imports “until a significant window of containment is achieved,” according to Agriculture Secretary Brooke Rollins.
