US Tariff Hikes Push Inflation Up, Labor Market Weakens

This week, markets are focused on U.S. economic indicators and trade policy developments amid ongoing tariff hikes initiated by President Trump, scheduled to take effect starting August 7. The trade balance is expected to show a narrowing deficit as firms unwind the import surge ahead of tariffs, but higher tariffs on imports from the EU and China are anticipated to increase consumer prices and pressure the labor market, reinforcing a 'stagflation lite' scenario. The U.S. Dollar has strengthened significantly following a Euro–US trade breakthrough and a hawkish Federal Reserve tone that diminished expectations for near-term rate cuts, while mixed Non-Farm Payroll data triggered volatility across asset classes with safe havens rallying and equities retreating. Investors are closely watching the upcoming ISM U.S. services sector survey for further signals on economic momentum and interest rate policy, with a growing probability of a Federal Reserve rate cut in September. Globally, central banks including the Bank of England and those in Asia are set to announce rate decisions, adding to market anticipation. Trade negotiations continue to evolve, with Taiwan facing a temporary 20% U.S. tariff rate that might be reduced upon further discussions, highlighting persistent uncertainties in global trade relations.