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Trump and Xi speak, agree to lower-level talks... President Donald Trump and Chinese leader Xi talked on Thursday. During the more than one-hour-long call, Xi told Trump to back down from trade measures that roiled the global economy and warned him against threatening steps on Taiwan, according to a Chinese government summary.
But Trump said on social media the talks focused primarily on trade led to “a very positive conclusion,” announcing further lower-level U.S./China discussions and “there should no longer be any questions respecting the complexity of Rare Earth products.” He also said, “We’re in very good shape with China and the trade deal.”
U.S., India push to finalize interim trade deal... Officials from the U.S. and India began closed-door, two-day trade talks in New Delhi on Thursday, two Indian government sources told Reuters. The U.S. delegation is led by senior officials from the Office of the United States Trade Representative with Indian trade officials headed by chief negotiator Rajesh Agrawal.
The two sides are aiming to finalize tariff cuts for specific sectors, including agricultural goods and automobiles. A deal may be formally announced by month end, before the self-imposed deadline of July 9 by President Donal Trump. A statement is expected once meetings wrap up, possibly by Sunday, an official said.
Previous reports suggested India was resisting opening its grain and dairy markets, citing potential backlash from its farmers.
Ag posts another trade deficit in April... U.S. ag exports totaled $14.41 billion in April against imports of $18.99 billion for a $4.58 billion deficit. Exports dropped $1.65 billion in April, while imports declined $1.63 billion in April. The U.S. has now posted an ag trade deficit in 18 of the last 19 months, highlighting the increased need and urgency to fix that situation.
Through the first seven months of fiscal year (FY) 2025, ag exports totaled $108.06 billion against imports of $133.41 billion for a deficit of $25.35 billion. USDA forecasts ag exports of $170.5 billion and imports at a record $220.0 billion, yielding a deficit of $49.5 billion. That would be up sharply from the current record deficit of $31.8 billion in FY 2024.
Crops drought footprint shrinking but dryness to persist through summer... As of June 3, the Drought Monitor showed 50% of the U.S. was covered by abnormal dryness/drought, down one percentage point from the previous week. USDA estimated D1-D4 drought conditions covered 21% of corn area (down two points), 16% of soybeans (down one point), 19% of spring wheat (down 10 points) and 6% of cotton production areas (down one point). Abnormal dryness (D0) still covers a good portion of the upper Midwest, along with the Central and Northern Plains.
Across major corn, soybean, wheat and cotton states, dryness/drought covered 72% of Iowa (no D3 or D4), 54% of Illinois (no D3 or D4), 32% of Indiana (no D3 or D4), 71% of Minnesota (no D3 or D4), 100% of Nebraska (2% D3, no D4), 82% of South Dakota (no D3 or D4), 37% of North Dakota (no D3 or D4), 58% of Kansas (no D3 or D4), 65% of Colorado (6% D3, no D4), 42% of Texas (19% D3 or D4), 10% of Oklahoma (no D3 or D4), 1% of Tennessee (no D3 or D4), 47% of Wisconsin (no D3 or D4) and 30% of Michigan (no D3 or D4). No measurable dryness/drought was reported for Ohio, Kentucky, Tennessee or Arkansas.
The Seasonal Drought Outlook calls for drought to persist or develop across the dry areas of the western/northern Corn Belt and Central/Northern Plains through August. Far northern Illinois and northwestern Indiana are also expected to see drought persist through summer.
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Brazil’s soybean exports slowed in May but rose from year-ago... Brazil exported 14.100 MMT of soybeans last month, according to official government data. That was down 1.272 MMT (8.3%) from April but up 663,000 MT (4.9%) from last year.
Brazilian corn exports totaled just 38,928 MT during May, down 139,419 MT (78.2%) from April and 374,446 MT (90.6%) less than last year.
Big investors shift away from U.S. markets... A growing number of global investors are pulling back from U.S. markets amid rising uncertainty tied to President Donald Trump’s trade war escalation and ballooning federal debt. Once considered the world’s safest financial haven, U.S. assets — including Treasuries, equities and corporate bonds — are now facing heightened scrutiny from sovereign wealth funds, foreign central banks, and institutional asset managers.
At the core of the retreat are two major factors:
1. Trade War Fallout
Trump’s new wave of tariffs — targeting China, the European Union and key trading partners like Japan and India — has intensified global trade tensions. The resulting retaliation and supply chain fragmentation have led to fears of long-term deglobalization and higher structural inflation. Investors now see greater risk premiums in U.S. equities and industrial sectors particularly exposed to international sales and imports. “Uncertainty over future trade rules makes it harder to forecast returns,” said one European fund manager. “We’re rebalancing toward Asia and Europe where the trade outlook is more stable.”
2. Debt Concerns and Fiscal Instability
The U.S. government’s debt has crossed $36 trillion and is rising at a pace unseen outside of wartime. With Trump pushing for major tax cut extensions and new industrial subsidies, fiscal hawks warn the U.S. is heading toward a sovereign credit reckoning. The Congressional Budget Office (CBO) estimates interest payments on federal debt will exceed defense spending by 2026. Foreign holdings of U.S. Treasuries have already started to decline, with Japan and China trimming their portfolios, citing concerns over long-term dollar stability. “The U.S. is acting like debt doesn’t matter,” said a senior advisor at a Middle Eastern sovereign fund. “It’s forcing diversification out of dollar assets.”
Where’s the Capital Going?
- Emerging markets: Countries with strong balance sheets and favorable demographics, such as India and Indonesia, are seeing net inflows.
- Gold and commodities: Hedging against dollar volatility and inflation, many funds are boosting commodity allocations.
- Eurozone bonds: As the ECB turns more dovish, European debt is regaining appeal despite lower yields.
Outlook: While the U.S. remains a major destination for capital, the post-2024 environment has dented its relative attractiveness. Markets are closely watching for signs of fiscal discipline or trade de-escalation before confidence can fully return.
BRICS nations accelerate shift away from U.S. dollar in global trade... The BRICS countries — led by Brazil, Russia, India, China and South Africa — are actively working to reduce their reliance on the U.S. dollar in international trade, a process known as de-dollarization. Recent developments indicate significant strides in this direction:
- Reduction in dollar usage: The use of the U.S. dollar in trade among BRICS countries has been reduced to approximately one-third of its previous level. This shift aims to enhance financial sovereignty and reduce exposure to external economic pressures, particularly those stemming from U.S. trade policies.
- BRICS pay system: BRICS nations have developed BRICS Pay, a decentralized payment messaging system that facilitates transactions in local currencies, aiming to reduce dependence on the U.S. dollar and Western payment systems like SWIFT.
- Abandonment of common currency plans: While there were discussions about creating a common BRICS currency, Brazil, under President Luiz Inácio Lula da Silva, has officially dropped the idea from its 2025 BRICS presidency agenda, focusing instead on strengthening trade in local currencies.
Despite these efforts, several challenges hinder the complete de-dollarization of BRICS nations:
- Dominance of the U.S. dollar: The U.S. dollar remains the primary reserve currency globally, accounting for about 90% of all currency trading.
- Economic diversity among BRICS: BRICS nations have diverse economies, making it challenging to implement a unified monetary policy or currency.
- Political pressures: Trump has warned BRICS nations against replacing the U.S. dollar, threatening 100% tariffs on their exports if they attempt to do so.
While the BRICS nations are making concerted efforts to reduce their reliance on the U.S. dollar through various initiatives, significant obstacles remain. The dollar’s entrenched position in global finance, coupled with political and economic challenges, suggest that while de-dollarization is progressing, it is unlikely to displace the greenback’s dominance in the near future.
ECB cuts interest rates... The European Central Bank (ECB) cut its benchmark interest rate by 25 basis points, as expected, as U.S. tariffs threaten to slow already tepid growth within the bloc. ECB President Christine Lagarde indicated at a post-decision news conference the need for further rate cuts depends on whether trade tensions with the U.S. can be resolved.
“A further escalation in global trade tensions and associated uncertainties could lower euro area growth by dampening exports and dragging down investment and consumption,” Lagarde said. “By contrast, if trade and geopolitical tensions were resolved swiftly, this could lift sentiment and spur activity. A further increase in defense and infrastructure spending, together with productivity enhancing reforms, would also add to growth.”