Charting the Global Economy: US Job Market Wavers in Cue for Fed

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As European Union leaders work through the consequences of their new trading arrangement with the US, they are confronting the bitter reality of just how far they have fallen. Even with the unpalatable terms, the EU may struggle to deliver on its new commitments to the US. 

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Asia

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Bank of Japan Governor Kazuo Ueda kept investors guessing over the timing of his next interest rate hike with comments that cooled expectations of a near-term move and weakened the yen. The BOJ kept the overnight call rate at 0.5% at the end of a two-day policy meeting in a widely expected unanimous vote.

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China’s top leadership emphasized its determination to reduce excess competition in the economy, with President Xi Jinping endorsing a campaign targeting one major cause of deflation and tensions with trade partners.

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Trump said Thursday he would impose a 25% tariff on India’s exports, before following through a day later, and threatened an additional penalty over the country’s energy purchases from Russia. India is weighing options to placate the White House, including boosting US imports, and has ruled out immediate retaliation, according to people familiar with the matter.

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Emerging Markets

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The global trade war that Trump unleashed from the Rose Garden that afternoon shook investor confidence in the US economy so much that it sparked a stampede out of the dollar. Much of that money has flowed into other developed countries but billions have washed up in developing nations, reviving a market that for more than a decade had been relegated to a mere afterthought in investing circles.

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Chile’s economic activity unexpectedly fell for the second month in June as a plunge in mining offset gains across other sectors in one of Latin America’s richest nations.

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Mexico’s quarterly economic growth came in higher than expected in the three months through June as manufacturing and services powered Latin America’s second-largest economy despite US tariffs.

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World

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At an average of 15%, the world is still facing some of the steepest US tariffs since the 1930s, roughly six times higher than they were a year ago. Trump’s latest volley outlined minimum 10% baseline levies, with rates of 15% or more for countries with trade surpluses with the US. The months of negotiations, marked by Trump’s social-media threats against US allies and foes alike, ended with new rates that were largely in line or lower than those on April 2.

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The world economy will keep weakening and remains vulnerable to trade shocks even though it is showing some resilience to Trump’s tariffs, the International Monetary Fund said. Its updated projections are slightly better than those in April, but largely reflect distortions such as front-loading in anticipation of tariffs.  

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In addition to the US, Canada and Japan, central bankers in Pakistan, Georgia, Singapore, Brazil, Colombia, Dominican Republic, Malawi and Eswatisi held interest rates steady. Chile, South Africa and Mozambique cut rates. Ghana lowered borrowing costs by the most on record.

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—With assistance from Nazmul Ahasan, Vinícius Andrade, Maya Averbuch, Ruchi Bhatia, Matthew Burgess, Katia Dmitrieva, Toru Fujioka, Selcuk Gokoluk, Philip J. Heijmans, William Horobin, John Liu, Yujing Liu, Matthew Malinowski, Mark Niquette, Swati Pandey, Jana Randow, Augusta Saraiva, Zoe Schneeweiss, Shruti Srivastava, Jorge Valero and Fran Wang.

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