• US President Donald Trump’s recent trade deal with Vietnam is a direct indication of the future tariff policy of the US government toward Chinese imports even though negotiations between Washington and Beijing currently continue. The agreement imposes a 20% tariff on most of Vietnam’s imports to the US, but a harsher 40% tariff on goods that are found to be transshipped, seemingly an attempt to close loopholes being utilized by Chinese sellers in order to circumvent currently in-force American tariffs. That 40% figure suggests a potential precedent for future tariffs with China, even if 55% tariffs that exist now are eventually reduced. The broader US-China trade agreement, under which China agreed to resume rare earths exports in exchange for eased US export restrictions on chip design software, ethane, and parts of jet engines, remains in effect through mid-August.

• The US trade policy reversal is already having its impact on logistics, with air cargo volumes of Asian shipments to North America declining in double digits after the US removed an exemption on tax-free Chinese packages in early May. The “de minimis” change, which imposed tariffs of as high as 145% on these shipments initially, has strongly reduced e-commerce volumes.

• In more positive news for Asian stocks, the $1.6 billion Ninety One Global Strategy Fund – Asian Equity Fund is overweight Samsung Electronics Co., who believe the company is “mispriced” by the market. This comes after a Korean shares rally, as the Kospi Index has climbed almost 30% so far this year on expectations of corporate governance reforms.

• Meanwhile, Japan’s May consumer spending was its largest increase since mid-2022, increasing 4.7% year-over-year, driven by car purchases and increased travel and dining expenditures. The rebound is a welcome respite for the Japanese economy, which is strained by US tariffs, including a 25% tariff on cars and car parts, and concern about the risk of a technical recession. The yen reduced losses against the dollar following President Trump’s signing into law of his signature tax cut bill, which will add $3.4 trillion to the national debt, fueling concerns about fiscal sustainability.