Chipmakers get larger tax credits in Trump’s latest ‘big beautiful bill’

Key Takeaways:

• Tariffs have prevented the Federal Reserve from lowering interest rates in 2025.
• Inflation forecasts have increased materially due to tariffs.
• Trump’s megabill narrowly passed the Senate, potentially boosting the economy but increasing the deficit.
• Electric vehicle maker XPeng maintains steady sales growth in June.
• Germany’s military exports more than doubled, reflecting shifts in global defense dynamics.

Tariffs Prevent Interest Rate Cuts, Says Fed Chair

Federal Reserve Chair Jerome Powell announced on Tuesday that tariffs are the chief reason the central bank has not lowered interest rates this year. Speaking on the economic outlook, Powell stated that the unexpectedly large “size” of tariffs has caused inflation forecasts to increase “materially,” preventing the Federal Reserve from reducing rates since its last cut in December.

The Unforeseen Consequences of Trade Policies

The impact of tariffs has been more significant than initially anticipated. “We could have been living in a world where the federal funds rate is at a range of 4% to 4.25%,” Powell suggested, highlighting the missed opportunity for lower borrowing costs. If inflation had remained below the Fed’s 2% goal, rates might have been as low as 3.75% to 4%, considering the central bank’s previous projections.

Economic What-Ifs and Inflation Pressures

The thought of lower interest rates is tantalizing for many. However, Powell noted that if President Donald Trump hadn’t imposed tariffs on trade partners, other policies might have similarly increased inflation forecasts. The initial optimism following Trump’s election—fueled by anticipated tax cuts and deregulation—could have led to economic exuberance and higher inflation without the dampening effect of tariffs.

Trump’s Megabill Narrowly Passes the Senate

In legislative news, President Trump’s extensive economic bill narrowly passed through the Senate. Vice President JD Vance cast the final, tie-breaking vote to send the bill back to the House for approval. While the bill is expected to increase the deficit, some banks believe it will provide a much-needed boost to the U.S. economy.

Market Movements Reflect Economic Uncertainty

On Tuesday, the S&P 500 dipped 0.11% from its record high. Tesla shares experienced a tumble after Trump suggested that DOGE take a look at the company’s subsidies, adding an unexpected twist to the market dynamics. While most Asia-Pacific markets fell on Wednesday, Singapore stocks reached a record high, showcasing mixed global market reactions.

XPeng’s Steady Growth in Electric Vehicles

Chinese electric vehicle manufacturer XPeng reported delivering 34,611 cars in June. This marks the eighth consecutive month the company has surpassed the 30,000-unit threshold. Despite XPeng’s steady growth, BYD remains the market leader, delivering more than ten times the number of vehicles.

Hedge Funds Bet Against the Swiss Franc

In financial strategies, hedge funds are increasingly betting against the Swiss franc. Engaging in a “carry trade,” investors borrow in currencies with lower interest rates—like the franc—to invest in currencies with higher rates, profiting from the difference. This move reflects broader trends in global currency markets.

Germany’s Defense Exports Reach New Heights

Germany’s defense industry is experiencing a significant boom. The value of German military exports hit €13.2 billion ($15.5 billion) last year, more than doubling from €5.82 billion in 2020. According to the German government’s most recent export log, 80% of arms exports were to “close partner countries” in the first quarter of 2025. This surge indicates shifting dynamics in global defense and trade relationships.

Navigating an Interconnected Global Economy

These developments underscore the complex interplay between trade policies, monetary decisions, and global economic trends. As tariffs continue to influence inflation and interest rates, and as nations adjust their defense and economic strategies, stakeholders must navigate an increasingly interconnected and uncertain global landscape.