Daily Comment (August 12, 2025)
by Patrick Fearon-Hernandez, CFA, and Thomas Wash
[Posted: 9:30 AM ET] | PDF
Our Comment today opens with President Trump’s extension yesterday of the US-China trade truce, along with additional issues in the bilateral relationship. We next review several other international and US developments with the potential to affect the financial markets today, including another interest-rate cut by the Australian central bank and personnel topsy-turvy at the Food and Drug Administration that has had a big impact on US pharmaceutical stocks.
United States-China: President Trump yesterday signed an executive order extending the current US-China tariff truce for another 90 days until mid-November. With the extension, US tariffs on most Chinese goods will remain at 30% rather than jumping to 145%, and China will continue to allow unfettered exports of its rare-earth minerals (at least in theory). While the extension provides some stability for US-China trade relations, it also likely reflects tough sledding in the trade negotiations between the two countries. Nevertheless, Asian stock prices have soared today in response, with the Japanese and Australian indexes hitting record highs.
- Separately, just a day after reports that Trump struck a deal with chip giant Nvidia allowing the firm to sell its lower-technology H20 semiconductors to China in return for the US getting 15% of the associated revenues, the president said he will discuss a new deal allowing the company to sell more advanced chips to Chinese customers.
- Trump suggested the chips sold to China under the new deal wouldn’t use cutting-edge technology. However, they would be a step up from the H20 chips. That suggests the president may succumb to Chinese pressure for the more advanced chips despite the risk that they could be used for military purposes against the US, so long as Nvidia pays enough to the US Treasury.
- According to the reports, some US national security officials are considering resigning to protest the sale of such advanced technologies to the Chinese.
- At the same time, reports today say Beijing has asked China’s major tech companies to justify their orders of Nvidia’s chips rather than domestic alternatives. The request suggests Beijing is now focusing more on the fact that China’s reliance on chips from Nvidia makes it vulnerable to a US embargo. While the Chinese government may still pressure the US to allow shipments of the chips in the near term, it is probably working hard to reduce or end its use of them in the future.
Russia-Ukraine: Just days before President Trump meets with Russian President Putin in Alaska to try to end his war against Ukraine, reports say Russian forces have broken through Ukraine’s defense lines in its eastern region of Donetsk. The Russian breach is reportedly the most dangerous for the Ukrainians in the last year and may show that the Kremlin is desperately grabbing for territory to improve its position in the Trump-Putin talks on Friday.
Europe: New satellite data confirms that European rhetoric and budget moves to rearm are now leading to actual factory construction and expansion. The data shows European defense firms have broken ground on about 2.8 million square meters of new facilities since the start of 2024, more than three times their groundbreaking in 2020-2021. At the risk of beating a dead (cavalry) horse, we think the figures confirm our long-held view that Europe’s defense rebuilding will be at least a short-term spur for the region’s economy and further boost its defense stocks.
United Kingdom: Chancellor of the Exchequer Rachel Reeves has ordered officials to plan for a further overhaul of the UK’s planning rules to speed up critical infrastructure projects, including construction of a third runway at Heathrow Airport in London. The order comes even though a less ambitious deregulation law is already making its way through parliament. In our view, the initiative is consistent with “YIMBY” moves to ease construction obstacles in the US and other Western countries, all of which could be positive for housing and construction firms.
Australia: The Reserve Bank of Australia today cut its benchmark short-term interest rate by 25 basis points to 3.60%, for its third rate cut this year. To justify the new cut, the central bank cited a modest weakening in the labor market and further evidence that consumer price inflation in Australia is falling back toward the midpoint of its target range of 2.0% to 3.0%. The move appeared to give a further boost to Australian stocks today, while the Australian dollar weakened by a slight 0.1% to $0.6505.
US Economic Data: President Trump last night said he will nominate the Heritage Foundation’s chief economist, AJ Antoni, to head the Bureau of Labor Statistics. Antoni has been a long-time critic of the BLS’s data collection methods, so he is expected to push for updated and improved processes. Nevertheless, since his nomination comes shortly after Trump fired the previous BLS leader for publishing weak job creation numbers, there may be concerns that future BLS reports could be manipulated to make the data appear more favorable.
US Pharmaceutical Industry: The Food and Drug Administration over the weekend said it has reinstated Vinay Prasad as head of the agency’s division for vaccines and other medicines, just weeks after he left the agency in response to pressure from right-wing influencer Laura Loomer. Prasad’s unexpected return has raised the prospect of further policy turmoil at the FDA, driving stock prices sharply lower yesterday for major biotechnology firms.
US Gold Market: President Trump yesterday confirmed that he did not mean to impose tariffs on imported gold, despite administration announcements to that effect last week. Gold prices declined about 1.2% on the news, ending at about $3,400 per ounce.