Trump ups the ante on trade

For the most part, commodity prices continued to fall this week as Donald Trump stoked the fire of trade tensions by proposing that $200bn of China’s exports to the US would be subject to a 10% tariff. The list of goods, published by the Trade Representative’s office, included many metal-intensive goods such as electronics. Meanwhile, the prospect of higher Libyan output weighed on the oil price, although it too appeared to respond to the escalation of trade tensions. The markets’ focus could be on the US in the next few days with Trump’s meeting with the Russian President, Vladimir Putin, and Fed Chair Jerome Powell’s semi-annual congressional testimony. Powell is likely to discuss the flattening yield curve. But we do not think he will make the case that it is cause for concern about growth, which could be negative for the gold price. On the data front, China is set to publish its activity and investment data on Monday. We expect the data to be lacklustre – consistent with the softer PMIs, import and credit data for June – which could add to the weakness in industrial metals prices.