The United States has an interesting week ahead as the country moves through critical trade agreements and important economic data releases.
Trade and Infrastructure
Recent developments include a comprehensive trade and cooperation agreement with the European Union. Then there’s the deal with Japan, which has a 15% tariff on almost everything. These agreements come amid a looming August 1 deadline for the US to finalize trade deals or face potential tariffs. President Donald Trump has warned of imposing heavy duties on countries that do not reach a deal, increasing uncertainty in the global trade landscape.
As these negotiations have been happening, our economy has continued to turn in promising indicators. That’s comparable to the economic growth in the US in June on a month-over-month basis at 0.3%—up from 0.2% in May. Many economists are predicting economic data will snap back in the second quarter. They think the recent data may be pointing to trends that are more widespread in the economy.
Recent Trade Developments
One of the most oft-cited successes of the US’s recent trade negotiations has been its accomplishments in the US-EU and US-Japan trade deals. The newly completed Comprehensive Trade Agreement with the European Union is intended to strengthen economic relations and lower trade barriers. This trend will further enhance linkages between the two economies. From steel tariffs to Section 301 actions against China, they’ve been the focus of many trade fights in recent years.
That’s a huge accomplishment, but the agreement with Japan is a bigger milestone. It imposes a 15% tax (tariff) on virtually all tradeable goods between our two countries. Such tariff structure will go a long way in assuring policymakers and businesses of both countries to assure more certain policy making and easier trading partners. But challenges still remain. Looking ahead, the US has yet to realize substantial successes with India and South Korea on their respective trade deals.
The August 1 deadline will be an important test of the political will of the US administration. In fact, President Trump’s latest signals indicate he is preparing to impose massive tariffs on any country that doesn’t agree to a trade deal. This recent development changes the game entirely. Investors are staring hard and any side-step, delay or settlement will be felt strongly with shifting the mood of investors.
Economic Indicators and Expectations
Economic indicators released in the last week present a decidedly mixed picture for the US economy. The upward revision to June’s growth figure of 0.3% shows we’re headed in the right direction. Evidence that the economy is starting to turn up the heat. The increase is a sharp turnaround from the -0.5% GDP growth measured in the first quarter of 2025. That decline was largely due to record imports spurred by frontloading ahead of future tariffs.
Economists have forecast that the second quarter’s advance GDP release will reflect an annualized growth rate of 2.5%. This possible rebound, if confirmed, would be very good news indeed, representing a strong reversal from recent years’ annual declines. The hope of a return to normalcy as evidenced by the numbers is very encouraging for both policymakers and market participants.
In addition to GDP figures, the release of Initial Jobless Claims on Friday at 12:30 GMT will provide further insight into labor market conditions. Investors will be paying extra attention to these numbers, as they are a leading indicator of overall economic well-being.
Federal Reserve’s Role in Economic Stability
There’s no denying that the US is going through hard economic times. In retaliation, the Federal Reserve announced that it will stop raising borrowing costs in its next meeting. The central bank’s decision comes amid concerns about rising inflation rates, which may push annual figures away from their long-term target of 2%. A more rapid rise in inflation would make the conduct of monetary policy more difficult and affect decisions on interest rates going forward.
The Fed’s communication strategy is very important in influencing economic expectations. By keeping borrowing costs down, the Fed hopes to foster sustained economic expansion while prudently addressing inflation risks. Trade agreements and monetary policy will determine the success of the US’s attempts to stabilize its failing economy. This is critical to do as our nation faces unprecedented uncertainty around the globe.