Key Points

• Trump Threatens China Over Rare-Earth Magnets: U.S. President Donald Trump warned of 200% tariffs if Beijing restricts rare-earth magnet exports, reigniting trade tensions despite a temporary tariff truce set to expire in November.
• South Korea Secures Major U.S. Trade Deals: Seoul pledged $150 billion in investments, alongside Korean Air’s record $50 billion Boeing order, deepening economic ties as Washington, Seoul, and Tokyo expand cooperation in energy and shipbuilding.
• French Political Risks Weigh on Markets: France’s CAC 40 dropped as much as 2% as Prime Minister François Bayrou faces a September confidence vote over €44 billion in budget cuts, raising uncertainty for European equities.
• Oil Retreats After Supply-Driven Spike: Brent slipped to $68.29 and WTI to $64.23 after Monday’s rally on Russia-Ukraine supply risks, with analysts expecting Brent to remain range-bound at $65–$74 amid ongoing geopolitical volatility.

Trump Threatens Tariffs Over Rare-Earth Magnets

U.S. President Donald Trump warned of 200% tariffs on China if Beijing restricts rare-earth magnet exports, raising fresh uncertainty over a fragile trade truce. While China controls about 90% of global rare-earth supply, recent data shows exports to the U.S. rebounded sharply in June and July. Trump also highlighted airplane parts as a bargaining chip, with Boeing eyeing a major deal with Chinese carriers.

Analysts view Trump’s remarks as bluster aimed at pressuring Beijing ahead of November’s tariff truce deadline, but the threat underscores Washington’s strategic vulnerability in rare-earths critical to autos, electronics, and renewable energy.

South Korea Unveils $150B Investment Pledge in U.S. Deals

The U.S. and South Korea announced sweeping agreements in Washington, highlighted by $150 billion in new South Korean investment commitments, a record $50 billion aviation deal by Korean Air, and expanded shipbuilding cooperation. The agreements include a $36.2 billion order for 103 Boeing aircraft and $13.7 billion in GE Aerospace engines and services, marking the airline’s largest purchase in history.

The announcements build on July’s trade deal that lowered tariffs on South Korean exports, while also expanding energy ties with a trilateral plan involving Japan to develop Alaska’s natural gas reserves, reinforcing economic and strategic cooperation.

French Political Turmoil Pressures CAC 40 and European Markets

French equities led European markets lower on Tuesday as the CAC 40 fell nearly 2% before trimming losses, with investors bracing for a Sept. 8 confidence vote that could topple Prime Minister Francois Bayrou’s government. Bayrou’s push for €44 billion in budget cuts to reduce a 5.8% deficit has drawn opposition resistance, raising political risk in Paris.

Broader European indexes also slipped, with the FTSE 100 and DAX down about 0.5%, as traders weighed U.S. political interference at the Federal Reserve after President Trump attempted to dismiss Governor Lisa Cook, adding further uncertainty to global markets.

Oil Pulls Back After Supply-Driven Rally on Russia-Ukraine Risks

Oil prices eased Tuesday, with Brent crude slipping 0.7% to $68.29 and WTI down 0.9% to $64.23, after surging nearly 2% in the prior session on heightened concerns over Russian supply disruptions. Ukraine’s strikes on Russian energy infrastructure and the threat of further U.S. sanctions had fueled Monday’s rally, but broader risk aversion and weaker equities prompted profit-taking.

Analysts see Brent confined to a $65–$74 trading range as geopolitical uncertainty lingers, while looming U.S. tariffs on India’s Russian oil imports add another layer of volatility to global energy markets.

Conclusion

Trump’s escalating rhetoric on rare-earths and fresh trade initiatives with South Korea underscore Washington’s dual approach of pressure and partnership, while France’s fragile political landscape injects fresh volatility into European equities.

In commodities, oil prices remain tethered to developments in the Russia-Ukraine conflict and U.S. sanctions policy, highlighting ongoing supply risks.

Markets remain highly sensitive to shifting geopolitical and policy dynamics, with trade negotiations, political risks, and energy supply concerns dominating sentiment. Against this backdrop, investors face a complex landscape where near-term volatility coexists with long-term structural shifts in trade, energy, and global political alignments.

Investment Insights

• Rare Earths & Trade Risks: Trump’s tariff threats highlight the strategic importance of rare-earth supply chains; investors should monitor exposure to U.S.-China trade-sensitive sectors, particularly aerospace, autos, and advanced manufacturing.
• South Korea Partnerships: Large-scale investment and energy deals with Seoul signal potential upside for U.S. industrials, shipbuilding, and energy infrastructure plays, reinforcing a theme of strategic alliances amid global trade fragmentation.
• European Political Uncertainty: France’s looming no-confidence vote could weigh on EU equities and the euro; portfolio hedging in European assets remains prudent until greater fiscal clarity emerges.
• Energy Volatility: Oil markets remain highly reactive to geopolitical shocks; price stability is fragile, supporting opportunities in energy hedging instruments and diversified commodity exposure.

Economic Calendar