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Navigating the Tariffs: A Look at the Latest Trade Developments

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28 July 2025

Written by
Ebury

T
The dollar traded lower against most currencies last week as market participants became increasingly jittery ahead of Friday’s looming tariffs deadline.Progress towards the striking of trade deals has been painfully slow since Liberation Day. We are, however, finally seeing some tangible headway, not least following last week’s headlines that the US and Japan had signed a long-awaited trade deal. This was followed by even bigger news over the weekend that the European Union had secured a framework deal with the White House that will also see the imposition of 15% tariffs on most goods, ending months of feverish speculation and acute uncertainty.  News of the latter will be a particularly welcome development for markets, which had braced for the possibility of significantly higher tariffs in both directions that would have likely had a major impact on the global economy. While many details of the deal are yet to be ironed out, and the tariffs themselves will still likely have a non-negligible downside growth impact, investors will just be pleased that the worst-case scenario has been avoided.

AUD

The Australian dollar was one of the better performers in the G10 last week, as news of trade deals boosted risk appetite and lifted some of the higher-beta major currencies. Reports and speculation that the deadline for a US-China trade deal is set to be delayed beyond 12th August is also providing some support for AUD. While the prolonging of the uncertainty is not exactly great news for Australian businesses, it does at least raise the possibility that a deal will be struck that avoids the imposition of higher tariffs. A handful of important macroeconomic data releases will be out in Australia in the next few days, including the June retail sales figures on Thursday and the revised manufacturing PMI data on Friday. Without question, however, the main focus will be on the Q2 inflation report on Wednesday. Signs of a continued convergence towards the RBA’s 2% target could seal the deal for an August rate cut, while raising the possibility of another rate reduction at the subsequent meeting in September. 

NZD

We saw a mild outperformance in the New Zealand dollar against its Aussie counterpart last week. NZD also benefited from easing concerns over the tariffs, while markets are slightly less convinced that the Reserve Bank of New Zealand will need to cut interest rates as aggressively as the RBA in the coming months. While the economy of the antipodean nation is clearly exposed to the downside risks associated with the tariffs, recent macroeconomic data has held up slightly better than expected, which neither guarantees another cut at the next RBNZ meeting in August, nor suggests that further easing beyond then is a foregone conclusion. 

USD

The US economy continues to show no signs of letting up. Businesses appear largely resilient to the uncertainty created by Trump’s tariffs, at least according to this month’s composite PMI from S&P, which jumped to its highest level since December. We’re also not seeing signs of mass layoffs in the labour market, with last week’s jobless claims figures dropping to the lowest levels since April. It’s somewhat of a surprise that the recent strength of the US economy has not yet been reflected in a stronger dollar, but this may merely have been a reflection of lingering jitters ahead of this Friday’s tariffs deadline.Trade developments aside, markets will be keeping an eye on Wednesday’s FOMC decision. While we expect no change in rates, we could see a couple of rare dissenting votes in favour of an immediate cut. Chair Powell is, however, likely to kick the can down the road, stressing again that more data on the economic implications of the tariffs will be required, and that the Fed will have greater clarity after the summer.

 

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