Key Takeaways
- China's manufacturing sector unexpectedly contracted in July, with both private and official Purchasing Managers' Index (PMI) data falling below the 50-point threshold, signaling a slowdown in demand and export orders.
- U.S. tariffs remain a significant point of discussion, with Australia confirming its 10% baseline tariff will stay, while President Trump indicates openness to more tariff deals and potential talks with Canada.
- China is pushing for large-scale commercialization of Artificial Intelligence (AI), with the NDRC reaffirming this strategic focus and the nation now hosting over 40% of global AI models.
- Asian currencies experienced declines, with the Thai Baht weakening by 0.3% and the Malaysian Ringgit falling to its lowest level since June 24.
Global Trade and Tariffs Under Scrutiny
The landscape of international trade remains dynamic, with U.S. President Donald Trump reiterating that his high tariffs are performing "very well" but expressing openness to further deals. Australian Trade Minister Don Farrell confirmed that U.S. tariffs on Australian goods will remain at a 10% baseline, noting that no country has lower reciprocal tariffs with the United States. Farrell stated that while Australia is in the "best possible position" under the new U.S. tariff regime, it will continue to advocate for the removal of all tariffs in line with their free trade agreement.
President Trump also indicated a willingness to speak with Canadian Prime Minister Mark Carney to discuss tariffs, signaling ongoing negotiations. Recent tariff agreements have seen countries like South Korea facing a 15% tariff, a reduction from a previously threatened 25% but still higher than past rates. India, however, faces a 25% tariff on its goods. Senate Minority Leader Chuck Schumer criticized Trump's tariff approach, labeling it an "experiment in chaos, dishonesty and inflation" and warning of increased costs for American consumers.
China's Economic Activity and AI Ambitions
China's manufacturing sector experienced an unexpected contraction in July, with the S&P Global China Manufacturing PMI falling to 49.5 from 50.4 in June, indicating a mild contraction. This marks the second contraction since October 2023. Similarly, the official manufacturing PMI also declined to 49.3 in July from 49.7 in June, falling below the 50-point expansion threshold. This downturn is attributed to slumping demand and weak export orders, despite a recent easing of trade tensions with the U.S. New export orders have now contracted for the fourth consecutive month. In response to these economic indicators, China's National Development and Reform Commission (NDRC) has reaffirmed its commitment to launching policies aimed at aiding domestic demand when necessary.
Despite the manufacturing slowdown, China is aggressively pursuing the large-scale commercialization of Artificial Intelligence. The nation aims to lead AI advancements by 2025 and become the premier AI innovation center by 2030. China's AI industry is currently valued at 600 billion yuan ($84 billion) as of April 2025, and the country now hosts 1,509 AI models, accounting for over 40% of the global total. Premier Li Qiang has even proposed the establishment of a World Artificial Intelligence Cooperation Organization, highlighting China's ambition to shape global AI governance. In a notable development for the automotive sector, China's Xiaomi (1810.HK) reported delivering over 30,000 cars in July.
Currency Movements and Yields
In currency markets, the Thai Baht experienced a decline of 0.3%, trading at 32.835 per U.S. Dollar. This weakening trend aligns with broader regional currency declines and a strengthening U.S. dollar. The Malaysian Ringgit also saw a significant drop, falling to its lowest level since June 24, weakening by 0.4% to 4.277 per U.S. Dollar. Meanwhile, in the bond market, the 2-Year Japanese Government Bond (JGB) Yield increased by 1.5 Basis Points, reaching 0.805%.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.