U.S. Threatens Japan with New Tariffs Amid Trade Tensions

In a significant development, the United States President has threatened to impose new tariffs on Japan, citing Japan's refusal to accept American rice exports. The President took to social media to express this threat, stating that Japan faces severe rice shortages and that the U.S. will send a letter to continue trade relations for the coming years. This move comes amidst ongoing trade negotiations between the two countries, which have been fraught with challenges, particularly around tariff levels and trade barriers. The White House's National Economic Council Director has indicated that the government will announce trade agreements with multiple countries post-Independence Day, with a focus on pushing through a major tax and spending bill before the congressional recess.

Meanwhile, the European Union has shown willingness to accept a trade agreement with the U.S., which includes a 10% uniform tariff on many U.S. exports to the EU. However, the EU is pushing for lower tariffs on key sectors such as pharmaceuticals, alcohol, semiconductors, and commercial aircraft. The EU Commission, which handles trade affairs, views this arrangement as slightly favorable to the U.S. but acceptable. The deadline for reaching a trade agreement with the U.S. is July 9, and failure to do so could result in a 50% tariff on nearly all EU exports to the U.S.

In the tech sector, Apple is considering a significant shift in its AI strategy. The company is exploring the use of external AI models from Anthropic PBC or OpenAI to support the next generation of Siri, marking a departure from its current reliance on in-house AI technology. This move comes as Apple's AI projects face challenges, and the company seeks to enhance Siri's capabilities. If Apple adopts an external model, it would represent a major change in its approach to AI, which has traditionally been based on its own "Apple Foundation Models" technology.

Meta Platforms Inc. has announced a major reorganization of its AI department, focusing on developing a "superintelligence" capable of performing tasks at a level equal to or better than humans. The new team, named Meta Superintelligence Labs, will be led by former Scale AI CEO, who has been praised by Meta's CEO as one of the most impressive founders of his generation. The team will also include the former CEO of GitHub, who will collaborate on leading the AI products and applications research. This reorganization underscores Meta's commitment to advancing AI technology and its potential applications.

In monetary policy news, the Federal Reserve's Atlanta branch president has reiterated his belief that the Fed will lower its benchmark interest rate target once this year. He emphasized that there is no urgent need for action, given the uncertainties surrounding the impact of trade tariffs on U.S. economic inflation dynamics. While he expects a rate cut in 2025, he plans for three cuts in the following year. The president highlighted the stability of the labor market and the need for patience in the face of ongoing economic uncertainties. He also warned that the effects of trade tariffs implemented by the U.S. President are not yet fully understood, and it remains unclear how much price increases consumers will tolerate.

Economists generally agree that the tariffs could significantly boost inflation in the coming months. However, the current mild inflation levels have cast doubt on this prediction, leading to a divide within the Fed on the interest rate path. The Fed has been cautious in its approach, waiting for more data before making a decision. The upcoming monthly employment report and the Consumer Price Index report will be crucial in shaping the Fed's next steps. Any unexpected developments could alter the trajectory of rate cuts. The uncertainty surrounding the impact of tariffs on the economy has made it difficult for economists to make confident predictions about future inflation trends.