Weekly economic review for the week ended July 11, 2025
Tariff threats back on the tables
With markets hovering at all-time-highs, US President Donald Trump ramped up his tariff rhetoric as 35% tariffs on Canadian imports has been implemented, effective from August 1; Trump cited fentanyl as the main reason for the tariffs. This move has sparked speculation that blanket tariffs of 15% to 20% would also be imposed on other trading partners.
Attention has now turned on pharmaceuticals, as Trump’s 200% tariff threat has prompted companies to urgently engage in scenario planning. Even with a delay, such a tariff is expected to have a detrimental effect on drug prices and profit margins. Despite concerns over US fiscal trajectory, the 10-year and 30-year auctions of US debt garnered solid demand.
Meanwhile, data from the Office for National Statistics revealed that UK economy unexpectedly shrank in May due to a decline in industrial output. Against the marginal positive forecast, gross domestic product (GDP) dropped for the second consecutive month as it declined by 0.1% in May following a 0.3% drop in April. Declines in industrial production and construction were partially offset by an increase of 0.1% in services output.
Data from both France and Germany highlight a fragile disinflationary path as both countries registered higher inflation for the month of May. Core components like services and food are still exerting upward pressure on prices.
Energy prices remain a key moderating factor, but their influence is waning as other sectors begin to drive inflation. These trends may complicate monetary policy decisions for the European Central Bank going forward, especially if inflation proves stickier than expected.
This article does not constitute legal and, or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap.371 of the Laws of Malta) and the Investment Services Act (Cap.370 of the Laws of Malta).