Global Finance and Trade 3: Trade Talks, Market Highs, and the Future of Global Economics

Author(s): Scott Douglas Jacobsen

Publication (Outlet/Website): The Good Men Project

Publication Date (yyyy/mm/dd): 2025/07/24

Michael Ashley Schulman, CFA, Chief Investment Officer of Running Point Capital Advisors, offers expert insight into current global financial dynamics. Schulman offers timely insights into macroeconomic trends, US fiscal policy, and the global tech landscape. In this in-depth July 2025 interview, economist Michael Ashley Schulman analyzes how US–China and US–UK trade negotiations contributed to record equity market highs despite geopolitical volatility. He explores the US dollar’s decline, driven by fiscal policy under Trump’s administration, and highlights mixed progress in bilateral trade talks ahead of the July 9 tariff deadline. Schulman discusses the Bank for International Settlements’ warnings, Japan’s cautious monetary stance, and diverging PMI readings in China and the Gulf. His insights reveal how shifting trade dynamics, monetary policy, and global risk perceptions are influencing market behaviour, investor sentiment, and broader economic resilience worldwide—interview conducted July 9, 2025. 

Scott Douglas Jacobsen: How has the progress on US–China and US–UK trade negotiations during June contributed to record highs in equity markets?

Michael Ashley Schulman: Tariff and trade developments—with their unpredictable twists and cliffhangers—have been frequent discussion topics with our family office clients this year. Progress on US–China and US–UK trade negotiations, along with other trade deals, has contributed to record equity market highs in unexpected ways. Trade negotiations are not the only factor contributing to economic and geopolitical uncertainty—while some conditions have improved and others have not, many adverse developments have proven less damaging than initially feared.

But first, some perspective on progress and equity market highs. The S&P 500 fell nearly 20% in just 33 days from its February 19 high to its April 7 low, shortly after Trump’s tariff Liberation Day on April 2, then recovered to new highs on June 27 in only 56 days. The day before the Independence Day holiday, both the S&P 500 and Nasdaq hit fresh record highs while their 50-day moving averages crossed above their 200-day moving averages, creating golden crosses that signal potential positive long-term market momentum.

On the face of it, trade is possibly more restricted, more taxed, and more burdened than it was at the beginning of President Trump’s second term and yet equity markets are at new highs. Trump’s postponement of reciprocal tariffs and willingness to extend deadlines and negotiate deals has lifted hope that restrictions will not be as burdensome as initially construed. Additionally, the stock market has performed better than feared as several other key concerns have dissipated. Economically, unemployment has remained relatively low, now around 4.1%, payrolls continue to grow, and labour remains resilient. DeepSeek worries about derailing artificial intelligence (AI) infrastructure spending dissipated in April when major cloud companies reaffirmed their commitment to massive datacenter investments worldwide, while earnings momentum strengthened as analysts stopped cutting their 2025-2026 estimates for S&P 500 companies. Meanwhile, oil prices eased as Israel spared Tehran’s oil fields, and overall Middle East anxieties subsided considerably following the US’s Operation Midnight Hammer strike on Iran’s nuclear facilities (on June 22), ending the 12-day war and alleviating concerns about potential Strait of Hormuz blockades. Most critically, Trump’s Big Beautiful Bill enacted on July 4 prolonged his 2017 tax reductions past their year-end sunset, averting what would have been a significant tax hike, even as bond markets show remarkable—and maybe questionable—indifference to the fiscal ramifications. 

There is a prevailing mood that we can grow and inflate our way out of the current debt-to-GDP ratio; nonetheless, the US Treasury yield curve has inverted again, with 3-month yields higher than 10-year yields, which is often considered a sign of impending recession. However, the inverted yield curve is a signal that we have chosen to downplay in conversations with our UHNW clients over the last several years, as so many other factors have weighed in to keep growth growing!

However, to come back to your specific question—I have not forgotten—during June, progress in US trade talks diverged sharply across partners as the White House’s 90-day tariff pause ticked toward its July 9 expiry — which of course is sure to be extended — but July 9 was supposed to be the knife-edge deadline on whether country-specific duties snap back to as high as 50%.

The UK won the gold-star award for promptness, locking in a 10% combined tariff cap on 100,000 UK autos a year, scrapping duties on aircraft parts, and enacting quotas (rather than tariffs) on future steel and aluminum flows. London, for its part, opened quotas for US beef, ethanol, and pharmaceuticals and promised to peel away a swathe of non-tariff barriers.

China’s negotiations yielded a narrower framework of understanding that restarts rare-earth exports and keeps most bilateral tariffs at the temporary 10% level while broader talks continue. The deal removed an acute input bottleneck for US automakers and defence suppliers—anticipation of the deadline had led US purchasers to front-load orders—but left fundamental disputes over intellectual property (IP) theft, data bans, and subsidies untouched. The betting markets are still unsure who has the weaker hand.

Multinational corporations as well as domestic purchasers are compelled to write two price lists: “If deal” and “If apocalypse.” I spoke with a real estate developer specializing in apartment buildings and multifamily structures. He purchased a full suite of appliances for about 100 apartments a year in advance of needing them, to lock in costs. 

What is remarkable is how few deals have been finalized compared to the original rhetoric of 90 deals in 90 days. EU/Brussels’ negotiator Maroš Šefčovič (I may have mispronounced that) sprinted to Washington, pitching a flat 10% tariff with carve-outs for autos and steel, but no deal! 

Japan is paddling upstream in these negotiations; after its seventh ministerial visit, President Trump threatened to push auto duties back to 25% unless Tokyo buys more US rice, because we’ve got to help our farmers.

India is still arguing over lentils and steel; Indonesia tossed the US a token plastics waiver; South Korea wants an extension; and a half-dozen others are probably hoping Washington forgets they exist—it will not.

Jacobsen: What drove the US dollar to its lowest point in over three years?

Schulman:  Trump. It is more than just that, but it is Trump.

Picture the greenback as Alex Warren’s chart-topper “Ordinary”. Suddenly, everyone’s streaming something else, and the once-inescapable hook now sounds, well, ordinary. A 10.8 % slide in the Dollar Index during the first half of 2025 — its worst opening act since the ‘70s — set the stage for June’s three-year low. 

If the US government seems unconcerned about fiscal discipline, currency markets will react. Can the US outgrow its debt? Yes, but for now, the currency markets have their doubts relative to other countries, and currencies are a relative game! In the stock market, two competing companies can see their shares rise, but currencies (FX markets) are always valued relative to other currencies. 

President Trump drove the dollar to its lowest point by degrading global confidence in the steady hand of US policy, threatening interference with our central bank (the Federal Reserve), verbally pulling back from global concerns, handicapping trade (which is typically dollar denominated) with heavy tariff talk—stop-start trade policy erodes the greenback’s safe-haven aura—and by leaning heavier into Federal debt expansion as part of his economic agenda with the One Big Beautiful Bill adding trillions to the deficit, thereby directly eroding confidence in the dollar and finally triggering Moody’s to lower its US debt rating in May which admittedly it had put on negative watch 18 months prior during the Biden administration. 

Also, interest rate futures now price roughly ¾-point of Fed cuts by year-end under Chair Jerome Powell—although I still downplay the possibility of lower Fed rates this year for Running Point’s internal market outlook that we share with family clients—lower yields drain the dollar’s streaming revenue, making it seemingly less valuable. Markets flinched when President Trump teased a quick-fire Powell replacement, raising the spectre of a “shadow chair” under administrative influence. Credibility costs climb whenever politics meddle with monetary policy. 

Globally, and possibly ironically, with Middle-East tensions easing and equities doing well, there is a risk of rotation in FX markets as traders ditch dollar safety for higher-beta currencies.

Most importantly, there is some credence to the thought that President Trump desires a weaker dollar because, A) It helps improve our exports (by making US goods cheaper) and can improve the earnings of US multinational companies with significant overseas sales that then translate back into more dollars, and B) A weaker dollar enables other central banks to cut interest rates and stimulate their economies without worrying about defending their currencies to repay dollar-denominated debt obligations. While many countries publicly complain about US turmoil, they are quietly benefiting from the economic opportunities and boost to global growth it creates.

Jacobsen: Which countries advanced/stalled bilateral trade talks with the US ahead of the July 9 tariff deadline?

Schulman:  We may have covered this, so apologies if I sound like a replay. Some foreign capitals sprinted for a handshake while others kept ghosting Washington. Here is who swiped right—and left on US Trade Representative Jamieson Greer.

The United Kingdom made significant headway. China has a framework understanding with much still left not understood, like IP theft, subsidies, and data. Vietnam has a preliminary deal that reduces tariffs from a threatened 46% to a still high 20%, particularly benefiting US importers who have transitioned manufacturing from China to Vietnam to avoid Chinese tariffs. Jakarta, Indonesia, eased import licenses on plastics, chemicals and other commodities to sweet-talk US negotiators, but I am unsure if everything is finalized.

The EU and Japan, as mentioned, are yet to finalize a deal, and they are unequivocally, relatively and essential to US trade and business!

Talks with India may be at a roadblock on farm, steel and auto duties as well as on US market-access demands. South Korea has asked for an extension, which should not be too surprising since the country recently elected Lee Jae Myung as President following the impeachment of predecessor Yoon Suk Yeol (I hope I pronounced that right).

Jacobsen: What risks did the Bank for International Settlements highlight in its recent report?

Schulman:  This sounds like a Jeopardy question. What are inflation, tariffs, protectionist measures, and debt service? I am afraid this is not a new story: cyclical headwinds of slower growth and lingering inflation collide with deeper structural faults. None of our clients are asking about this. 

BIS’s overarching message is that monetary policy alone cannot secure stability and that a soft landing for the global economy may be elusive. Credible fiscal consolidation, structural reforms and close oversight of shadow banks (private lenders) are essential to keep today’s pockets of stress from becoming tomorrow’s crisis—this is not new news. Realistically, although their report was published at the end of June, I have to assume that most of the thought and apprehensions that went into it were calcified a couple of months ago when tariff turmoil was trending. 

Interestingly, the report advocates for tokenization’s ability to deliver digital innovation to central banks by preserving trust and value in ways that stablecoins cannot—this has been a topic of theirs for at least a couple of years. 

Jacobsen: Why did the Bank of Japan maintain its policy rate at 0.5%?

Schulman:  The Bank of Japan (BoJ) has tasted positive-rate life and, for now, has decided a polite half-point is plenty. With core inflation still bubbling around 3½% %—well above its 2%target—and BoJ Governor Ueda fretting over tariff cross-winds and a yen that still seems to be in a weakening trend even though it is considerably stronger than it was at this time last year, there could be reason for them to hike. However, for now, the BoJ Board froze the overnight rate at 0.5% and even dialled back the pace of bond-purchase tapering to avoid a sugar crash in JGB (Japanese bond) markets—had they raised rates, bond prices would have likely tumbled. Hawkish Board members (e.g., Hajime Takata) insist this is only a pause before the sequel, but the script probably depends on US trade twists and wage growth. 

For investors, this means that Tokyo remains the monetary version of “Stranger Things”, i.e., the upside-down of global policy. In contrast, the Fed is parked at a lofty 4.5% and debating when to resume cuts; the ECB just delivered its eighth quarter-point trim, nudging the deposit rate to 2%; and the Bank of England has tiptoed south from 5.25 to 4.25% with its series of cuts. 

The net result is that the yen carry trade still wears the superhero cape—hedge funds can fund in yen and chase higher-yielding assets abroad, but the crusader of cheap lending (the yen) has become less predictable. When the BoJ raises rates again, you could see a risk-off move as more hedge funds unwind a portion of their carry trade out of fear that the yen will rise and make paying back their borrowings more expensive. For now, traders can still play the differential but need to keep one eye open for any sudden tremors.

Jacobsen: What do the divergent PMI readings in China and the Gulf economies reveal about regional economic resilience/dependence on global trade flows now?

Schulman: I do not have the numbers off the top of my head, but the Gulf states have positive PMIs above 50 while China has been bouncing above and below 50 for the last year and has been below 50 over the last three months. It is important to understand that PMI readings can highlight different things across the globe. 

China’s PMI is a proxy for shipping container traffic—Beijing’s growth narrative still leans on external tailwinds—and a reading below 50 may indicate a post-tariff hangover combined with an inability to stimulate enough domestic spending. By contrast, the Gulf readings owe less to container counts and more to petrodollar-fueled spending on megaprojects, tourism influxes, sovereign-backed capital expenditures, and robust domestic demand. Strong Gulf PMIs imply steady infrastructure steel and cement demand even if China’s appetite plateaus.

Jacobsen: Thank you for the opportunity and your time, Michael.

Schulman: Thank you, always a pleasure to chat with you, Scott. 

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