Are US tariffs putting the heat on US prices? Not yet, according to newly published data from the US government. While core inflation is up, a steady headline rate could be enough to yield an interest rate cut next month.
Elsewhere, China is facing down the challenge from US tariffs by facing inward, with plans to boost domestic consumption through cheaper borrowing.
US inflation relief?
US inflation numbers published today have provided welcome relief to many, with the headline rate coming in at a cool 2.7% in the year to July, matching the rate posted for June.
Yet the year-on-year core consumer prices index (CPI) inflation rate, which excludes goods that fluctuate more regularly, crept up by 0.3%, marking its highest rate since February.
That’s a “touch higher than expected”, as Bloomberg’s Chris Anstey has noted. The FT reported, meanwhile, that renewed hopes for a Federal Reserve interest rate cut thanks to the steady headline rate were driving record highs on the US stock market.
President Donald Trump wrote on his Truth Social platform:
“It has been proven, that even at this late stage, Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers.”
Chris Giles, the FT’s economics commentator, pointed out yesterday that there would be a “time lag” as tariffs are not applied to goods that have left the origin port and many companies had front-loaded their products.
Seema Shah, chief global strategist at Principal Asset Management, told the BBC that she now expected the Federal Reserve to cut the interest rate, and that while “there is some sign of tariff pass through to consumer prices” it is not “significant enough to ring alarm bells”.
China shifting focus
Much of China’s growth in recent years has been overwhelmingly export-led – something that has irked competing economies and contributed to the US’ tariff policy. This focus on exports for its manufactured goods owes much to China’s weak domestic economy.
Today (13 August) there is some indication that China’s government is looking to redirect focus towards domestic consumption, after vice finance minister, Liao Min, said that it would seek to cut borrowing costs for both businesses and individuals. The support will come in the form of interest subsidies for businesses in consumer service sectors, as well as for households.
Liao added that the policy would help domestic consumption to become a “major driving force of the national economy” as China looks to adjust to US protectionism.
The EU is also reviewing its relationship with the Asian nation, and Politico Pro’s Camille Gijs wrote today that Brussels is launching a new review of how foreign investments and bids can be distorted by overseas governments – not least China.
International Trade Awards nominations closing
The nominations for this year's International Trade Awards close this Friday (15 August).
Ahead of the deadline for submissions, you can put forward your nominations for categories including Innovation in Trade, Investment in Trade and Rising Star in Trade at this link. You can also hear from the winners of 2024's Investment in Trade Award here.
The awards celebrate excellence among both trading businesses and trade professionals, and take place as part of the Import Export Show later this year.
Government updates
The UK’s dairy farmers have avoided the imposition of new barriers to their exports to Egypt, the UK government has said.
The avoidance of the barrier, which would have required halal certification on UK dairy goods from January 2026, will “protect an estimated £250m in additional export opportunities for farmers over five years”, the government adds.
Rod Addy, director general of Provision Trade Federation, said that “Egypt’s decision to remove mandatory halal certification requirements for imports of dairy products is a welcome development, eliminating a longstanding trade barrier for UK exporters”.
The government also issued a separate announcement today to note UK Export Finance’s (UKEF) support for UK business Rainbo to deliver millions of pounds’ worth of equipment to Uganda under a new contract. A further notice also detailed a major new UKEF-backed investment in Ukraine.
What else is happening in trade
- The Mexican peso is growing in strength as investors seek to put money in Mexican assets during a relative moment of calm in trade relations with the US
- The UK, France and Germany have told the UN they will reimpose sanctions on Iran if it refuses to resume negotiations with the US over its nuclear programme
- Rolls-Royce’s nuclear reactor plans could make it Britain’s most valuable company should they be used to power AI data centres, its CEO told the BBC
- Bioethanol producers in the UK could face closure as the country’s tariff deal with the US puts it under pressure, Politico reports
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