Deal(s) or No Deal(s)? Brace for the July Trade Showdown Along with a Weakening Dollar, Weekly Economic Commentary, 7 Jul 2025

Download a PDF copy of the weekly economic commentary here.

Markets

Major equities markets ended on a positive note though investor sentiment was dampened by the passing of President Trump’s tax and spending bill (which was signed into law on Friday), with the CBO estimating that debt-service costs would total USD 551bn over the 2025-2034 period—increasing the bill’s cumulative effect on the deficit to some $3.3 trillion, and the looming trade tariffs deadline (the uncertainty leading to weakness in Asian equities given the continent’s export-led growth). Regional markets performed well on strong PMI readings, even as regional geopolitical tensions linger in the background. Among currencies, the dollar clocked in the worst start to the year since 1973 and continued to weaken, while the GBP posted a weekly loss on economic and political worries and outlook. Oil price edged slightly higher ahead of the OPEC+ meeting. Gold price posted a weekly gain, thanks to its safe-haven status, on rising concerns related to US trade deals and fiscal future.

Global Developments

US/Americas:

President Trump’s budget bill passed in the House of Representatives and was signed into a law last Friday. The bill, estimated to add USD 3.3trn to federal deficits over the next decade, includes an extension of the 2017 tax cuts, restrictions and cuts to Medicaid, boost to defence and border spending, removes tax breaks designed to boost clean energy projects as well as reduced food benefits among others.
The US and Vietnam announced a trade deal on July 2 though the details are being finalised according to negotiators from Vietnam; the deal has been agreed “in principle” similar to that agreed with the UK in June (discussions are still going on about items including metals imports). Among countries still discussing deals with the administration are Canada, China, EU, India, Japan, Korea and Thailand. (A good synopsis: https://time.com/7300389/trump-trade-deals-tariff-letters-deadline/)
Non-farm payrolls increased by 147k in Jun (May: 144k), though the increases could be traced back to the government (+73k) and healthcare sector (+39k). Labour force participation rate was little changed at 62.3% (May: 62.4%). Average hourly earnings gained by 0.2% mom and 3.7% yoy in Jun. Unemployment rate eased to 4.1% (from 4.2%). The stronger-than-expected labour market picture reduces the chances of a Fed rate cut.
Private sector jobs in the US fell by 33k in Jun, the first drop since Mar 2023, and after gaining 29k the month prior. Payrolls for service roles overall fell by 66k alongside expansions in goods-producing roles (+32k).
JOLTS job openings unexpectedly increased to 7.769mn in May (Apr: 7.395mn), the highest reading since Nov 2024; job openings in the federal government declined by 39k. There were 1.07 jobs for every unemployed person, up from 1.03 in April.
Initial jobless claims in the US declined by 4k to 233k in the week ended Jun 27 and the 4-week average slipped by 3.75k to 241.5k. Continuing jobless claims stood unchanged at 1.964mn in the week ended Jun 20, the highest since Nov 6, 2021.
Goods and services trade balance widened to USD 71.5bn in May (Apr: USD 60.3bn), as goods trade deficit widened (to USD 97.5bn from USD 96.6bn in Apr) alongside a slight decline in the services surplus (of USD 0.1bn to USD 26.0bn).
Factory orders in the US rebounded by 8.2% mom in May (Apr: -3.9%) as commercial aircraft orders surged (+230.8%). Orders for non-defence capital goods excluding aircraft also rebounded 1.7% in May.
S&P Global manufacturing PMI rose to 52.9 in Jun (May: 52), supported by a rise in new orders (thanks to positive marketing campaigns), new export orders (though partly limited by tariffs) and employment growth hit the most since Sep 2022. Price pressures are high, with input costs rising the most in almost 3 years.
ISM manufacturing PMI rose by 0.5 points to 49 in Jun, despite a drop in new orders (46.4 from 47.6) and employment (45 from 46.8) while prices paid rose (69.7 from 69.4). ISM services PMI turned expansionary in Jun, with the reading up to 50.8 (from 49.9) thanks to upticks in new orders (51.3 from 46.4) and production (54.2 from 50). Tariff concerns and Middle East tensions were referred to by survey panellists.
Chicago PMI eased to a 5-month low of 40.4 in Jun (May: 40.5), also staying below the 50-mark for the 19th consecutive month, as readings dropped for production and employment alongside increase in prices paid to the most since May 2022. Dallas Fed manufacturing business index stayed contractionary for the fifth month in a row in Jun, though the headline number was up 2.6 points to -12.7. New orders and shipments were negative (at -7.3 each) while the uncertainty reading jumped to 15.2.

Europe:

Inflation in the eurozone edged up to 2.0% in Jun (May: 1.9%) while core inflation held steady at 2.3%. Services inflation ticked up to 3.3% (May: 3.2%).
Eurozone’s manufacturing PMI inched up to 49.5 in Jun (May: 49.4), the highest level since Aug 2022, with Ireland and Germany posting the 37- and 34-month high; new orders were mostly unchanged while business confidence was the highest in over three years. Services PMI grew to 50.5 (from initial estimate of 50 and May’s 49.7), on higher output and employment.
Producer price index in the euro area decreased by 0.6% mom in May (Apr: -2.2%), with declines across energy (-2.1%) and intermediate good (-0.1%) while industrial producer prices rose for consumer goods (durables and non-durables ticked up by 0.1% and 0.2% respectively). In yoy terms, producer price index eased (0.3% from 0.7%).
Unemployment rate in the euro area ticked up to 6.3% in May (Apr: 6.2%), with youth unemployment rate rising to 14.4% (from 14.3%); about 2.281mn young people were unemployed across the euro area.
Harmonized Index of Consumer Prices (HICP) in Germany eased to 2.0% in Jun (May: 2.1%), the lowest since Sep.
German factory orders declined by 1.4% mom in May (Apr: 1.6%), the first decline in four months; excluding large orders, it fell by a larger 3.1%. Domestic orders plunged 7.8% while foreign demand ticked up by 2.9%; non-euro area orders were up 9.0% alongside a 6.5% fall in orders from the eurozone. In yoy terms, orders were up by 5.3% (from 5.8% gain in Apr).
Retail sales in Germany unexpectedly fell by 1.6% mom in May (Apr: -0.6%) as sales declined across food (-1.3%) and non-food sectors (-2.2%) while online sales fell by 1.4%. Sales grew by 1.6% yoy, easing from the 2.9% gain in Apr.
Manufacturing PMI in Germany held at the 34-month high of 49.0 in Jun, thanks to increase in both new orders (growth was strongest since Mar 2022), new export orders (third straight month of increase) and output. Confidence was the highest since Feb 2022, “reflecting the plans for increased public sector spending”.
Unemployment rate in Germany stood unchanged at 6.3% in May, still the highest reading since Sep 2020, though the number of unemployed people (+7% yoy to 2.914mn) is close to 3 million for the first time in a decade.
UK GDP grew by 0.7% qoq and 1.3% yoy in Q1, unrevised from the first estimate. GDP was supported by the services sector (+0.7% qoq), production (1.3%, revised up from previous estimate of 1.1%) and construction (0.3%). Real household expenditure was also revised up to 0.4% (from a 0.2% gain).
UK manufacturing PMI rose to a 5-month high of 47.7 in Jun: output, new orders and employment fell further, but at a slower rate. The report specified that new export business fell for the forty-first month in a row with responses indicating reduced demand from the US, Europe and China. Services PMI climbed to 52.8 (from the flash estimate of 51.3), as new orders increased (thanks to domestic demand) while employment contracted (partly due to high payroll costs) and input cost inflation eased for the second month in a row.

Asia Pacific:

China’s NBS manufacturing PMI moved up to 49.7 in Jun (May: 49.5) but stayed below-50 for the third month in a row. New orders turned expansionary (50.2 from 49.8) while foreign sales fell (47.7 from 47.5) and sentiment fell to a 9-month low (52.0 from 52.5). Non-manufacturing PMI rose to 50.5 (May: 50.3), the highest since March, with subdued readings across new orders (46.6 from 46.1), foreign sales (49.8 from 48.0) and employment (steady at 45.0).
Caixin manufacturing PMI in China climbed to expansionary zone, up to 50.4 in Jun (May: 48.3), thanks to an increase in output and new orders though new export orders fell three months in a row. Caixin services PMI eased to 50.6 in Jun (May: 51.1), the weakest since Sep 2024, with foreign sales falling the most since Dec 2022.
Japan’s overall household spending grew by 4.7% yoy in May (Apr: -0.1%), the fastest increase since Aug 2022, with strong gains in transportation and communications (+25.3%, due to auto purchases) and recreation and leisure (+11.1%, thanks to travel demand).
Jibun Bank Japan manufacturing PMI increased to 50.1 in Jun, from May’s 49.4, clocking in the first expansion since May 2024 even as demand remained subdued.
Industrial production in Japan rebounded 0.5% mom in May (Apr: -1.1%), given similar changes in production machinery (+5.6% from Apr’s -8.7%) and motor vehicles (2.5% from -0.9%). IP fell by 1.8% yoy, the first decline in five months, and reversing Apr’s 0.5% gain.
Industrial output in India increased by 1.2% yoy in May (Apr: 2.6%), the slowest pace in nine months, as manufacturing output gained 2.6% (from 3.1%) while electricity and mining output contracted by 5.8% and 0.1% respectively. Cumulative output was up by 1.8%.
India’s fiscal deficit stood at INR 131.63bn in Apr-May, or 0.8% of the government’s annual target. Total receipts jumped 28.0% yoy to INR 7.33trn (or 21.0% of the full-year goal), while spending grew by 19.7% to INR 7.46trn (14.7% of full-year target).
India’s manufacturing PMI stayed at the preliminary reading of 58.4 in Jun (May: 57.6), the highest since Apr 2024, thanks to a 1-year high of new orders and a record pace in employment growth.
Inflation in Korea inched up to 2.2% in Jun (May: 1.9%), with increases across multiple categories including furnishings & household equipment (4.4%), food and non-alcoholic beverages (3.4%) and restaurants & hotels (3.0%) among others. The BoK had cut rates by 25bps in May to support the economy.
Manufacturing PMI in Singapore climbed to a neutral 50 in Jun (May: 49.7), thanks to expansions across new orders and new exports. Electronics sector PMI also improved, rising to 50.1 in June from 49.9 in May.
Retail sales in Singapore expanded by 1% mom and 1.4% yoy in May (Apr: flat mom & 0.2% yoy), on increased motor vehicle sales (11.9% mom and 10.4% yoy).

Bottom line: With the tariff deadline just around the corner, the favoured political choice seems to be the less detailed, opaque agreement “in principle” while detailed negotiations continue – trade deals with Vietnam and the UK have been agreed in this manner. Many nations including Canada, the EU, India, Japan and Korea continue discussions, even as President Trump disclosed that letters will be sent to 12 unspecified countries with “take-it-or-leave it” offers. In the backdrop of the ongoing BRICS Summit, Trump also threatened nations aligning with BRICS policies with an extra 10% tariffs should these nations embrace “anti-American” policies. This week’s release of the Fed meeting minutes will once again drive discussions about the timing of the next rate cut and possibly speculation about Powell’s future as the Fed Chair. Separately, the JPMorgan global manufacturing PMI moved into expansion, as both output and new orders clocked in readings above 50, but with tariffs around the corner the 12-month ahead optimism was relatively subdued (below the long-run average for the 15th consecutive month).

Regional Developments

OPEC+ decided to raise oil production by 548k barrels per day in Aug, from the 411k bpd approved for May, June and July, citing relatively steady global economic outlook and low oil inventories.
Bahrain became the first GCC nation to introduce a dedicated rulebook for stablecoins effective last week. The legal requirements include maintaining of one-to-one reserves by the issuers in high-quality, easily accessible assets as well as minimum capital of about USD 660k, clear governance structures and strong cybersecurity systems.
Non-oil private sector PMI in Egypt fell to 48.8 in Jun (May: 49.5), as output and new orders fell more sharply and employment fell for the fifth month in a row. Geopolitical pressures as well as weak demand and sentiment led to expectations for future activity dropping to the lowest ever recorded in Jun.
Real GDP in Egypt grew by 4.77% yoy in Jan-Mar 2025, the highest quarterly rate in 3 years, supported by the rebound in private investment (+24.2% yoy) and non-oil manufacturing (+16% vs a 4% drop in the same period a year ago). This raised the average growth in the first three quarters of 2024-25 to 4.2% (versus 2.4% in the same period a year ago). Growth is projected to cross 4.0% in the 2024-25 fiscal year, according to the Ministry of Planning, Economic Development, and International Cooperation.
Activity at the Suez Canal plummeted by 23.1% yoy in Jan-Mar 2025, versus a worse 51.6% plunge in the same period a year ago.
IMF announced that it would combine Egypt’s fifth and sixth reviews for its USD 8bn loan program to provide authorities with additional time to rollout and implement its reform programs.
Egypt’s ministry of finance plans to disburse 50% of the total overdue payments to around 2,400 exporting companies (valued at over EGP 25bn) under the export subsidy program starting Aug 7th.
Kuwait’s PMI slipped to a 3-month low of 53.1 in Jun (May: 53.9), along with increases in output, new orders and a series record increase in new export orders as well as a record increase in employment and staff costs.
The government of Kuwait officially issued Law No 80 of 2025 – the bilateral agreement with Saudi Arabia on avoiding double taxation on income as well as curbing tax avoidance and evasion. The Law clearly defines residency and permanent establishment and the types of taxes covered (not limited to existing regimes, but can also be extended for any future taxes imposed). Tax treatments for various range of income sources are also defined including capital gains, joint ventures, fees for boards members as well as income from immovable property among others.
Kuwait strengthened its AML/CTF law: a decree issued last week allows for a government committee to be delegated powers to implement resolutions aimed at combating terrorism and its financing – a power that was reserved for the cabinet previously. Fines of up to KWD 500,000 (USD 1.64mn) was also announced for violations.
The 15% tax on MNCs in Kuwait is estimated to generate annual revenues of almost KWD 250mn: the tax is applicable to MNEs with global revenues of EUR 750mn and above in at least two of the immediate four preceding financial years.
Lebanon’s PMI edged up to 49.2 in Jun (May: 48.9) though staying below the 50-mark for the fourth month running. Output fell more moderately despite weaker sales, while employment and inventory levels held steady. Future expectations remain pessimistic, with 53% of respondents expecting activity levels to diminish in the coming 12 months.
Credit extended to Oman’s private sector accelerated by 6.8% yoy to OMR 27.9bn in May, according to central bank data, while deposits grew by 7.9% to OMR 32.3bn.
Oman plans to introduce an e-invoicing system in Q3 2026, to fast-track tax payments while improving accuracy and efficiency. Oman will become the third GCC country to do so: Saudi started phased implementation in Dec 2021 and the UAE plans to launch in Q2 2026.
Qatar’s real GDP grew by 0.3% qoq and 3.7% yoy in Q1 2025, thanks to gains in the non-mining and quarrying sector (+5.3% yoy) also accounting for 63.6% of overall GDP. Growth was supported by both hydrocarbon and non-hydrocarbon sectors, rising by 1.0% yoy and 5.3% respectively. Compared to Q4 2024, mining & quarrying gained 2.9% while non-mining & quarrying posted a 1.2% drop. A breakdown by sector showed the fastest upticks in wholesale & retail trade (14.6% yoy in Q1) and accommodation & food services (13.7%).
PMI in Qatar ticked up to 52 in Jun (May: 50.8), the strongest gain since Mar, thanks to gains in output and employment while selling prices declined for the 11th straight month. According to S&P Global, “growth in the wholesale & retail and services sectors almost offset lower new orders in construction and manufacturing”.
GCC and Japan began its second round of FTA negotiations, following the first round in Dec. GCC exports to Japan reached USD 84bn in 2024 (2023: USD 93bn) due to lower oil pieces while Japanese exports to the GCC ticked up to USD 24bn (from USD 22bn).
Global SWF reported that of the GCC sovereign wealth funds, that collectively manage USD 5.9trn in assets, Saudi PIF scored a 100% in the 2025 GSR (governance, sustainability, and resilience) scoreboard. The PIF was followed closely by Oman’s OIA and Abu Dhabi’s Mubadala.
Venture capital to GDP ratio in Saudi Arabia grew for four consecutive years, recording a five-year average of 0.07%, according to a MAGNiTT report. UAE and Egypt clocked in 5-year averages of 0.20% and 0.11% respectively. Topping the list globally was Singapore with a VC to GDP ratio of 1.3% ahead of US and UK with 0.79% and 0.73% respectively.
US issued an order lifting sanctions on Syria last week. Separately, Syria’s finance minister disclosed that its stock trading week will be expanded to five days a week from this month, in addition to introducing market reforms to support listings, market activity and investments.

Saudi Arabia Focus

Saudi Arabia’s non-oil private sector PMI rose to a 3-month high of 57.2 in Jun (May: 55.8), as new orders increased a 4-month high (64.3 from 62.5, driven by domestic sales) and hiring was up at the fastest rate since May 2011 alongside rising input and output prices (the latter the most in 1.5 years).
Credit growth in Saudi Arabia outpaced deposit growth for the 16th straight month in May and consumer spending accelerated.Overall deposits grew an average 9.2% in Jan-May 2025; despite posting negative yoy readings for the past ten months, govt deposits surged by 8.5% mom in May. Claims on the public sector grew faster than that on the private sector in all months this year (latter accounts for more than three-fourths total claims). SAMA’s SAMA’s net foreign assets grew by 4.7% mom to SAR 1.633trn in May while declining in yoy terms for the 5th month in a row (May: -2.1%).
Saudi Arabia and Indonesia signed deals and MoUs worth USD 27bn across various sectors including clean energy and petrochemicals. Bilateral trade amounted to USD 31.5bn in the last five years, according to the Saudi Press Agency.
Spending by international tourists in Saudi Arabia grew by 10% yoy to SAR 49.37bn (USD 13.16bn) in Q1 2025, according to central bank data. The travel account surplus widened by 11.7% yoy to SAR 26.78bn.
Assets of the Saudi Public Investment Fund increased by 18% to SAR 321trn (USD 1.15trn) in 2024, but its net profit plunged by 60% yoy to SAR 25.8bn despite the 25% surge in revenues to SAR 413bn.
A Knight Frank report highlighted that average rents for Grade A office spaces in Riyadh grew by 23% yoy by end-Q1, supported partly by the regional HQ program, and occupancy rate was at 98%. Grade B rents also surged by end-Mar, up 24% with occupancy rate at 97%.
Hotel occupancy in Saudi Arabia grew to 63% in Q1 from 60.9% a year ago, according to GASTAT data. The average daily room rate dipped by 3.4% yoy to SAR 477 while the average length of stay was around 4.1 nights (similar to a year prior).
Reuters reported that Saudi Aramco was considering the sale of up to five gas-fired power plants to raise around USD 4bn – leading to more profits, improved efficiency, lower costs and increased reliance on cleaner sources of electricity.

UAE Focus

UAE’s non-oil private sector PMI posted a modest increase to 53.5 in Jun (May: 53.3) as output expanded amid a dip in new orders to 54.5 – the lowest since Sep 2021 and down from May’s 56.2. Dubai’s PMI dropped to its lowest level in nearly four years to 51.8 (May: 52.9) as sales growth slowed while employment rose for the third month in a row.
Despite strong acceleration in UAE’s deposit growth (average of 10.8% in Q1 2025), gross credit growth lagged (9.5%).Share of loans to the private sector was almost 3/4th of domestic credit in Mar; and loans to business and industrial sector accounted for almost 2/3-rds of credit to the private sector. Lending to SMEs rose to the highest since Q2 2023, rising to AED 84.0bn. Personal loans for consumption accounted for more than one-fourth of disbursed loans in Dec, followed by construction & real estate (14%), financial institutions (11%).
The UAE Ministry of Finance’s 2024 report revealed that UAE’s total outstanding domestic public debt stood at AED 23.45bn by end-2024. The report also highlighted that the 146 agreements had been signed to avoid double taxation by end-2024 and that the launch of 14 auctions under the Islamic Treasury sukuk programme raised AED 17.1bn in total.
Real GDP in Abu Dhabi grew by 3.4% yoy to AED 291bn in Q1 2025, supported by robust non-oil sector activity (6.12% yoy). Contribution of the non-oil sector stood at a record high 56.2% of the total, underscoring the emirate’s diversification efforts. Manufacturing sector also had the largest contribution to GDP in Q1 2025 (9.8%), followed closely by construction (9.1% share) and financial (6.7% share) sectors. The fastest growing sectors were professional, scientific and technical activities (10.3% yoy), construction (10.2%) and financial & insurance (9.1%).
Abu Dhabi population grew by 7.5% yoy to 4.135mn persons in 2024, with 54% of residents aged 25-44. The past decade has seen a 51% surge in total population, from 2.7mn in 2014. The emirate’s workforce increased by 9.1% in 2024, with professional roles expanding by 9.1%.
Dubai launched a first-time home buyer scheme: a flexible payment plan with preferential prices for financing and tailored mortgage solutions will be available to persons aged 18 and above with no freehold home, for properties from 13 developers valued at a maximum of AED 5mn. Potential buyers need to register to apply to the scheme. This should attract a new set of investors into the Dubai real estate market and support the Dubai Real Estate Strategy 2033 objectives to raise homeownership rates and double the sector’s contribution to Dubai’s GDP.
Dubai Duty Free reported a 5% yoy increase in revenues to more than AED 4bn in H1 2025. The top performing categories were perfumes (5% to AED 744mn), liquor (AED 513mn), cigarettes and tobacco (12% to AED 440mn), gold (6% to AED 417mn), confectioneries (63% to AED 413mn) and cosmetics (3% to AED 202mn).

Media Review:

Oman: 11 income sources subject to new individual income tax
https://www.zawya.com/en/economy/gcc/oman-11-income-sources-subject-to-new-individual-income-tax-m5jcgul6

The Apprentice: Federal Reserve Edition
https://www.project-syndicate.org/commentary/trump-misguided-plan-to-announce-new-fed-chair-early-by-kenneth-rogoff-2025-07

Ten charts to explain Trump’s big, beautiful bill
https://www.economist.com/graphic-detail/2025/07/01/ten-charts-to-explain-trumps-big-beautiful-bill

UNCTAD: Global public debt hit a record $102 trillion in 2024, striking developing countries hardest

https://unctad.org/news/global-public-debt-hit-record-102-trillion-2024-striking-developing-countries-hardest