Key Points

• Wall Street Reassesses Trade War Risk as Tariff Fallout Appears Contained: Markets are growing less fearful of recession as effective U.S. tariff rates stabilize near 15%, easing inflation concerns and lowering JPMorgan’s recession risk to 40%.
• Hungary Cuts 2025 Growth Forecast to 1% Amid Prolonged Economic Weakness: Hungary slashed its 2025 GDP outlook to 1% amid continued stagnation in agriculture and industry, adding pressure on Prime Minister Orban ahead of a challenging election year.
• India Overtakes China in U.S. Smartphone Exports Amid Apple-Led Manufacturing Shift: India became the top U.S. smartphone supplier in Q2, driven by Apple’s production shift from China, as firms seek tariff-resilient manufacturing alternatives.
• Barclays Delivers 23% Profit Jump as Tariff-Driven Trading Boosts Investment Bank: Barclays outperformed with strong H1 earnings as trading revenue surged on tariff-driven market volatility, fueling shareholder returns and affirming strategic profitability targets.

Wall Street Reassesses Trade War Risk as Tariff Fallout Appears Contained

Despite elevated tariff levels under recent trade agreements, Wall Street sentiment has improved as the effective rates—stabilizing near 15%—remain below the feared 25%+ threshold floated in April. Economists now see reduced recession risk, supported by resilient global growth, modest inflation impact, and looser financial conditions. JPMorgan lowered its U.S. recession probability to 40%, while Morgan Stanley expects slow growth rather than contraction. The U.S.–EU deal has tempered expectations of global retaliation, though unresolved trade issues ahead of the Aug. 1 deadline remain a key risk. Markets now look to the Fed for policy signals as inflation pressures moderate.

Hungary Cuts 2025 Growth Forecast to 1% Amid Prolonged Economic Weakness

Hungary’s government sharply lowered its 2025 GDP growth forecast to 1% from 2.5%, citing persistent weakness in agriculture and industry, as well as the lingering effects of post-war inflation. The revision aligns with the central bank’s 0.8% and OECD’s 0.9% projections, marking the weakest three-year stretch under Prime Minister Orban since 2010. While election-year stimulus—including tax breaks and pension hikes—remains in place, officials ruled out amending the 2025 budget. Despite stagnant growth and a 74% debt ratio, the government aims to contain the fiscal deficit below 4% of GDP, relying on frozen spending and revenue resilience to stabilize public finances.

India Overtakes China in U.S. Smartphone Exports Amid Apple-Led Manufacturing Shift

India surpassed China as the leading smartphone exporter to the U.S. in Q2, with its share of imports surging to 44% from 13% a year earlier, according to Canalys. The shift reflects Apple’s accelerated relocation of assembly to India amid tariff risks and U.S.–China trade tensions. Chinese exports fell to 25%, while Vietnam claimed 30%. Despite Apple’s ramp-up in India, yield rates remain lower than in China, and iPhone shipments to the U.S. dropped 11% year-over-year. The shift underscores broader supply chain realignment as firms seek tariff-resilient production hubs while balancing cost and scale efficiency.

Barclays Delivers 23% Profit Jump as Tariff-Driven Trading Boosts Investment Bank

Barclays reported a 23% rise in H1 pretax profit to £5.2 billion, beating estimates as heightened market volatility from Trump’s tariff policy fueled strong trading revenue. The bank’s fixed income, currencies, and commodities division saw a 26% jump, outpacing major U.S. peers. Equities income rose 25%, while advisory fees lagged, falling 16%. Barclays announced £1.4 billion in shareholder returns via dividends and buybacks, and reaffirmed progress toward its 12% return-on-tangible-equity target for 2026. CEO Venkatakrishnan emphasized stability and strategic refocusing on core domestic banking. A pending U.K. Supreme Court ruling on motor finance probes remains a watch point.

Conclusion

Global markets are navigating a transition from trade tension to cautious stabilization. The U.S.–EU deal and a cooling trade war with China have tempered recession fears as tariff rates settle near 15%, supporting equities and easing inflation pressure. Commodities like copper and oil reflect tightening fundamentals, while supply chain shifts—such as India surpassing China in U.S. smartphone exports—highlight geopolitical realignments. Barclays’ strong trading performance underscores the benefits of volatility for financial sectors. Yet weak growth in Hungary and lingering macro risks signal vulnerability. Investors now await pivotal U.S. data and central bank guidance to shape positioning into August.

Investment Insights

Tariff Normalization Supports Risk Assets: With effective tariffs stabilizing below peak fears, investor sentiment has improved. Equities and credit markets may benefit from reduced recession risk and clarity in trade policy.

Watch Policy-Linked Growth Divergence: Hungary’s downgraded outlook highlights vulnerabilities in politically driven economies. Investors should remain selective in emerging market exposure, favoring fiscal discipline and structural reform.

India’s Manufacturing Ascent Creates New Supply Chain Themes: The surge in smartphone exports from India signals growing resilience and investable trends in Southeast Asian manufacturing and logistics infrastructure.

Volatility Favours Financials: Barclays’ trading-fueled beat shows banks with strong capital markets arms may continue to outperform in tariff-driven and rate-sensitive environments.

Upcoming Key Dates to Watch

Date	Event	Why It Matters
Jul 29–30, 2025	FOMC policy decision & Powell press conference	Guidance on interest rates and tariff-driven inflation risks
Jul 31, 2025	June PCE price index (core inflation)	Fed’s preferred inflation gauge; informs rate outlook
Aug 1, 2025	July U.S. nonfarm payrolls report	Labour market trends crucial to Fed’s policy path
Aug 1, 2025	Tariff deadline for trade agreements	May trigger new trade terms or extension vs. escalation

Disclaimer

This newsletter provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.