Israel, Iran tensions escalate... Israel and Iran continued to exchange missile strikes through the weekend in an escalation of tensions in the Middle East. Planned nuclear talks between the U.S. and Iran were canceled following the Israeli offensive, with Iran’s foreign minister declaring negotiations “unjustifiable” under fire.
Trump said Sunday that while a peace deal between Israel and Iran remains possible, both sides may need to “fight it out” before reaching an agreement to end their escalating conflict. Trump confirmed the U.S. is not currently involved in Israel’s military operations, though he noted in an ABC News interview that it is “possible” the U.S. could get involved.
Of note: Oil prices edged down on Monday after surging 7% on Friday, as renewed military strikes by Israel and Iran over the weekend left oil production and export facilities unaffected. Key remains whether the conflict will lead to disruptions in the Strait of Hormuz. About a fifth of the world’s total oil consumption passes through the strait.
G7: High-stakes talks amid trade and global crises... The G7 summit early this week hosted by Canada comes at a time of deep division over foreign policy and trade, especially with the U.S. under President Trump’s aggressive tariff policies. Canadian Prime Minister Mark Carney will hold a crucial one-on-one meeting this morning as the G7 Summit begins in Kananaskis, Alberta.
Carney’s stated goals for the summit include advancing peace and security, fortifying supply chains for critical minerals, and supporting job growth. However, the agenda is likely to be overshadowed by contentious issues such as U.S. tariffs, the ongoing Middle East crisis after Israeli strikes on Iran, and the war in Ukraine.
Carney has decided not to pursue a formal G7 communique, aiming instead to minimize discord and prioritize practical outcomes. The summit will also address global security and climate challenges, all while Trump pushes for Russia’s readmittance to the G7 — against opposition from other leaders.
Japan’s top trade negotiator holds crucial talks with United States... Japan’s chief trade negotiator, Ryosei Akazawa, held a 30-minute telephone conversation with U.S. Commerce Secretary Howard Lutnick on Saturday as part of a high-stakes push to resolve trade tensions with the United States. The timing of these talks is critical, as Japanese Prime Minister Shigeru Ishiba prepares to meet Trump on the sidelines of the G7 summit.
To move talks forward, Japan has proposed increased imports of U.S. ag products, the removal of non-tariff barriers on American cars, and greater U.S./-Japan collaboration on rare earth magnets and semiconductor supply chains — key areas for both nations as they look to reduce reliance on China.
India, U.S. harden trade stance ahead of tariff deadline... Trade officials from India and the U.S. have toughened their positions as they attempt to finalize an interim trade agreement before higher U.S. tariffs on Indian goods are set to take effect July 9. Recent negotiations in New Delhi focused on several contentious issues, including U.S. demands for India to open its market to genetically modified crops, reduce tariffs and price controls on medical devices, and relax stringent data localization rules requiring companies to store data on Indian servers.
India, meanwhile, is pressing the U.S. for exemptions from current tariffs on steel, automobiles, and pharmaceuticals, and has warned of retaliatory tariffs scheduled to begin July 9 if no deal is reached. The U.S. is also investigating the pharmaceutical sector under Section 232, a step that could lead to additional tariffs on Indian drug exports.
While both countries are pushing for concessions, trade analysts note that India appears to be conceding more by cutting most-favored nation tariffs, whereas the U.S. has yet to offer reciprocal reductions and is maintaining a 10% baseline tariff for all nations.
Despite hardened stances, analysts believe a limited deal is still possible, but the risk of prolonged negotiations remains if neither side yields on key demands. Both countries are working toward a phased agreement with an initial pact targeted for July.
Vietnam and U.S. set for virtual trade talks... Vietnam and the U.S. have agreed to hold a virtual trade meeting in the coming days, seeking to resolve outstanding issues and lay the groundwork for direct negotiations between Lutnick and Vietnam’s Minister of Industry and Trade Nguyen Hong Dien. This follows a third round of technical-level negotiations in Washington, D.C., where “significant progress” was made, but key disputes remain.
Vietnam recently agreed to significantly increase its purchases of U.S. ag products through a series of memorandums of understanding (MoU). In early June, during a trade mission to the U.S., Vietnamese companies signed MoUs worth roughly $2 billion, including at least $800 million tied to Iowa suppliers for corn, wheat, soybean meal, and dried distillers grains over the next three years.
Follow‑up reports noted this total expanding to around $3 billion, involving 20 MoUs with U.S. agribusinesses, covering grains, meat, timber and biofuel feedstock.
Summer economic outlook: Watchful waiting amid tariffs, legislation and geopolitical risks... Dr. Vince Malanga, president of LaSalle Economics, writes: “We are viewing the summer months as a period of watchful waiting,” with several key issues driving market uncertainty and policy decisions.
Tariffs: Malanga highlights that effective U.S. tariffs have risen from 2.5% pre-Trump to about 12% currently. He believes that “the inflationary impact from tariffs is being overstated,” noting that May price indexes showed “no discernable impact.” A similar report for June “could cause tariff hysteria to dissipate, easing inflationary expectations.”
Congressional gridlock: Malanga warns of “acrimonious debate… over spending” in Congress as tax and spending bills move forward, anticipating a resolution by the August recess but noting, “negotiators could scare investors into thinking a stalemate could occur.”
Geopolitical tensions: Malanga points to energy market volatility due to “pending geopolitical issues involving Russia/Ukraine and Iran versus Israel and the U.S.” While lower energy prices helped in May, “oil and gas prices have rebounded” amid intensifying tensions. He cautions that events such as “Israel’s attack on Iran could worsen this condition,” but also notes the potential for a price drop if tensions ease and spare capacity is tapped.
Policy outlook: FOMC in wait-and-see mode. Malanga expects the Federal Reserve to remain on hold through the summer: “Barring a sudden deterioration in the labor market, which we do not rule out, we suspect the FOMC is likely to be in a watch and wait mode through summer.” He criticizes the Fed’s stance, arguing “the FOMC should be cutting interest rates months ago in preemptive fashion,” given “a slowing economy with diminishing inflation pressure while monetary and fiscal policy is restrictive.”
Malanga underscores the importance of “strong non-inflationary economic growth… to ease deficit concerns,” but stresses that “a solid recovery in the housing market remains a must.”
He concludes: “A lowering of mortgage rates is necessary… and the FOMC could be instrumental… by ending its quantitative tightening and ratifying a decline in long term rates by cutting short term rates. If the tariff bogeyman is slayed and geopolitical tensions ease, there is no reason for such action to be delayed.”