2025-07-24 18:28

New levy could devastate Brazil's citrus industry, affecting farmers and production U.S. consumers face higher orange juice prices due to dependency on Brazil Brazilian exporters have limited options if new U.S. tariff is enforced SAO PAULO, July 24 (Reuters) - U.S. President Donald Trump's plan to impose a new 50% tariff on all Brazilian products from Aug. 1 could devastate the South American nation's citrus belt, as factories scale back production and orange farmers consider leaving fruit to rot amid a sharp drop in prices. "You are not going to spend money to harvest and not have anyone to sell to," said grower Fabricio Vidal, from his farm in Formoso, in the state of Minas Gerais. Sign up here. The new tariffs could make it impossible for his fruit to enter the United States, which buys 42% of the orange juice exported from Brazil, a trade worth around $1.31 billion in the season ending last June. This month, orange prices in Brazil dropped to 44 reais ($8) a box, almost half of what they were a year ago, according to the widely followed Cepea index from the University of Sao Paulo, illustrating how Trump's disruptive trade policies can sow chaos even before enacted. "As the day approaches in which tariffs will come into effect, anxiety increases about what might happen," Ibiapaba Netto, the head of orange juice exporter lobby CitrusBR, told Reuters in an interview. IMPACT ON CONSUMERS U.S. orange juice production dropped to its lowest level in half a century in the 2024/25 harvest, with output estimated at 108.3 million gallons, according to data from the United States Department of Agriculture cited by Cepea, which shows imports will represent 90% of U.S. supplies through September. U.S. consumers will bear the brunt along with Brazilian farmers. An astounding half of the orange juice Americans drink comes from Brazil under household brands such as Tropicana, Minute Maid and Simply Orange. Brazil, which produces 80% of the world's orange juice, will be hard to replace, too. The U.S. has become more dependent on orange juice imports in recent years due to the "citrus greening" crop disease, hurricanes and spells of freezing temperatures. But the new tariff on Brazilian imports represents a 533% increase over the $415 per ton duty levied on the country's juice now. Last Friday, Johanna Foods, a New Jersey-based producer and distributor of fruit juices, challenged in court the proposed tariffs on Brazilian orange juice, claiming they would cause "significant and direct financial harm" to the company and U.S. consumers. The tariffs may also spell trouble for Coca Cola (KO.N) , opens new tab and Pepsi (PEP.O) , opens new tab, which account for some 60% of the orange juice sold in the United States, Netto said. Neither company replied to requests for comment. NO EASY ANSWER Brazil won't find it easy to replace American consumers, some of the most avid orange juice drinkers in the world. Typically, higher-income countries import orange juice, limiting Brazil's potential reach into new markets. Brazilian orange juice is only sold to some 40 nations – representing about a third of the destinations that buy Brazilian meat, for example, according to trade data. CitrusBR's Netto noted that hefty duties in markets such as India and South Korea, as well as low household income in China, have hampered trade with Brazil. The European Union, in turn, already buys some 52% of Brazil's total exports, making it unlikely that countries there will make up for lost business with the U.S. Companies will be left with few options. One would be to export Brazilian orange juice through Costa Rica, which some companies already do to avoid the current duties, said Arlindo de Salvo, an independent orange consultant. But it is unclear whether exporters will be able to pull it off once the new levy starts being enforced. CitrusBR said such "triangulation" via Costa Rica is impossible under rules of the Organization for Economic Cooperation and Development (OECD). As companies struggle to find new paths to consumers, farmers in Formoso fear the worst. Prices have already dropped to about a third of what growers were paid at this time last year, farmers said, making the cost of picking oranges hardly worth the trouble. Grower Ederson Kogler said that the only solution would be to find other markets. But, he added, "these are things that don't happen overnight." https://www.reuters.com/world/americas/trump-tariffs-wreaking-havoc-brazils-citrus-belt-2025-07-24/

2025-07-24 18:16

Alphabet, SK Hynix, Infosys offer upbeat guidance Rosy forecasts come against backdrop of tariff uncertainty Governments scramble for tariff deals ahead of August 1 deadline Hyundai Motor expects tariffs to take bigger toll in Q3 Markets bolstered by strong tech results July 24 (Reuters) - Businesses focused on artificial intelligence are raking it in so far this earnings season. Those catering to actual people, less so. The AI spending surge is providing a big boost for semiconductor and software giants like Google parent Alphabet (GOOGL.O) , opens new tab, while companies from airlines to restaurants and food manufacturers are struggling to navigate an erratic U.S. trade policy which is boosting costs, upending supply chains and hurting consumer confidence. Sign up here. Along with Alphabet, SK Hynix and India's Infosys (INFY.NS) , opens new tab exceeded market forecasts on Thursday and predicted brighter days to come, with Alphabet and SK Hynix both flagging plans to boost spending. SK supplies the world's most valuable company Nvidia (NVDA.O) , opens new tab, the AI chipmaking giant that recently surpassed $4 trillion in market value. By contrast, executives at many consumer names were less enthusiastic, from luxury bellwether LVMH (LVMH.PA) , opens new tab, packaged food giant Nestle (NESN.S) , opens new tab, to toymakers Hasbro (HAS.O) , opens new tab and Mattel (MAT.O) , opens new tab and airlines Southwest (LUV.N) , opens new tab and American (AAL.O) , opens new tab. They, along with automakers and giants like Coca-Cola(KO.N) , opens new tab, have indicated that some segments of the buying public have pulled in their spending as prices and interest rates remain high. The dichotomy is evident in IBM's results. Sales in Big Blue's "AI book of business" grew 25 percent in its most recent quarter to $7.5 billion, while its software segment fell short of expectations and the company sounded cautious about how much its consulting segment might grow this year. The equity market has accentuated the positive. News that the U.S. had struck a trade deal with Japan and was closing in on a deal with the European Union ahead of an Aug 1. deadline boosted markets. The broad S&P 500 (.SPX) , opens new tab notched another record this week and the Eurostoxx (.STOXXE) , opens new tab was just a few points shy of that mark. "The market is getting friendly with a view that tariffs ending up higher than they have ever been for 100 years will not have a negative impact on economic growth, because we haven't seen any negative impact on economic growth so far," said Van Luu, head of solutions strategy, fixed income and foreign exchange at Russell Investments. Whether companies continue to absorb that hit remains to be seen. So far, companies have reported over July 16-22 a combined full-year loss of as much as $7.8 billion, with automotive, aerospace and pharmaceutical sectors hurt the most by tariffs, according to a Reuters tariff tracker. U.S. averages have been buoyed by the so-called Magnificent Seven, a group of tech giants that has benefited heavily from spending plans on artificial intelligence, and currently accounts for more than 30% of the value of the S&P. "AI is one of the strongest areas of growth for the economy, and the market mirrors the economy," said Adam Sarhan, chief executive of 50 Park Investments. To be sure, the market's reaction may be in part because a larger-than-normal percentage of companies are clearing a lowered bar for estimates. At the beginning of April, the market expected 10.2% year-over-year S&P earnings growth, but by July, that number had dropped to 5.8%, according to LSEG data. With about 30% of constituents reporting results, the blended earnings growth rate sits at 7.7%. TECH GOES FULL SPEED AHEAD AI-focused businesses continued to print money in the most recent quarter. Nvidia (NVDA.O) , opens new tab supplier SK Hynix posted record quarterly profit, boosted by demand for artificial intelligence chips and customers stockpiling ahead of potential U.S. tariffs. Indian IT services provider Infosys (INFY.NS) , opens new tab raised the floor of its annual revenue forecast range to 1% to 3%, from flat to 3%, matching analyst expectations. "The tech community is going ahead full speed ahead... and banks are in a very strong position now," said Bill George, former chairman and CEO of Medtronic and executive education fellow at Harvard Business School. "Other companies will struggle to get growth." UNCERTAIN CONSUMER Consumer companies have been less upbeat. Nestle, the world's biggest packaged food maker, reported softer demand as it struggled to win thrifty shoppers to its big brands. U.S. airlines Southwest and American Airlines warned that Americans are travelling less, the latest signal that U.S. consumers are remaining cautious about their spending. Toymakers Mattel and Hasbro both said uncertainties around tariffs are acting as a headwind. Carmakers are among firms dealing with the most difficulty. The auto giants are resisting raising prices, eating the cost of tariffs that may cost them millions or billions of dollars. Levies on metals, copper and auto parts made it harder to navigate changing tariff policies. South Korea's Hyundai Motor (005380.KS) , opens new tab on Thursday posted a 16% decline in second-quarter operating profit, saying U.S. tariffs cost it 828 billion won ($606.5 million) in the second quarter, with a bigger hit expected in the current quarter. General Motors (GM.N) , opens new tab still expects a $4 billion to $5 billion hit to its bottom line this year. On Wednesday, Tesla (TSLA.O) , opens new tab Chief Executive Elon Musk said U.S. government cuts in support for electric vehicle makers could lead to a "few rough quarters", as his firm reported its worst quarterly sales decline in over a decade. ($1 = 1,365 won) https://www.reuters.com/business/autos-transportation/earnings-season-its-ai-good-everything-else-not-so-much-2025-07-24/

2025-07-24 16:08

Deposit rate left at 2% ECB awaits outcome of US-EU trade talks Reported 15% tariff worse than ECB's baseline Autumn rate cut seen as less likely FRANKFURT, July 24 (Reuters) - The European Central Bank left interest rates unchanged on Thursday and offered a modestly upbeat assessment of the euro zone economy, raising doubts among investors about further policy easing even while U.S. tariff threats cloud the outlook. The ECB has cut its policy rate eight times since June 2024 after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia's 2022 invasion of Ukraine. Sign up here. But the economy was now in a "good place" and growth is in line with projections or a "little bit better", ECB President Christine Lagarde said, bolstering market bets that the ECB may be done with cutting rates altogether. Financial markets which had fully priced in a rate cut this autumn just days ago now see only an 80% chance of a move, and even that may not come until the spring. Confirming waning appetite for rate cuts, sources close to the discussion said the bar for a move in September was high and would require weaker growth and inflation, along with lower staff projections. Lagarde herself took a more measured stance and would not be drawn into rate cut talk. "We are in this wait-and-watch situation," Lagarde told a press conference. "We are in a good place because our projections point to inflation stabilising at target in the medium term." She said the ECB's baseline projection for modest growth and inflation at its 2% target continued to hold, and that most data since the June data have confirmed that outlook. Lagarde's optimistic tone even prompted some economists to look again at their own projections. "We are revising our forecasts and no longer expect a final cut of the ECB deposit rate to 1.75% at the September meeting," Commerzbank economist Jörg Krämer said. "Now expect an unchanged deposit rate of 2.0% for the rest of this year and for 2026." Recent data suggest the economy is holding up well and fresh PMI surveys out on Thursday indicated an acceleration in business activity, led by a solid improvement in the dominant services industry and with manufacturing recovering. Euro zone banks have seen rising loan demand and policy uncertainty has not yet translated into an economic or market downturn even if some companies are starting to feel the pinch from tariffs in their profits. TRADE UNCERTAINTY Trade negotiations still pose a risk and a final deal is far from certain, even as reports suggest that the two sides are moving closer on a possible agreement based on a 15% tariff on U.S. imports of EU goods. "We are attentive to where the negotiations are heading (but) we take the news one day at a time," Lagarde told a press conference. "The sooner this trade uncertainty is resolved, the less uncertainty we will have to deal with and that will be welcomed by many economic actors including ourselves." While the White House has dismissed the reports as speculation, 15% tariffs would be roughly halfway between the ECB's baseline and severe scenarios for the euro zone economy, presented last month, but milder than Trump's threatened 30%. The ECB's June estimate showed that higher U.S. tariffs would result in lower growth and - depending on any EU retaliation - lower medium-term inflation in the euro zone. Even the ECB's baseline projection from June, which incorporates 10% tariffs from the United States, saw price growth below 2% over the next 18 months. Lagarde acknowledged that scenario included the possibility of a temporary undershooting of the inflation target but said it was not a cause for concern. "With growth holding up and inflation at target, we believe the cutting cycle is drawing to a close," Konstantin Veit, a portfolio manager at PIMCO said. "The current 2% policy rate is likely a level considered the mid-point of a neutral euro area policy range by the majority of Governing Council members." Lagarde's upbeat assessment also pushed short-dated German bond yields to their largest daily rise in two months, as traders took it as a signal that another series of rate cuts next year might be unlikely. "Taking today’s meeting at face value, the bar for yet another rate cut this year has clearly been raised," ING economist Carsten Brzeski said. "Still, we think that actual inflation could come in lower than the ECB expects and hard macro data could rather disappoint over the summer." https://www.reuters.com/business/finance/upbeat-ecb-keeps-rates-steady-raising-doubts-about-further-easing-2025-07-23/

2025-07-24 15:36

SAO PAULO, July 24 (Reuters) - Brazilian motor maker WEG (WEGE3.SA) , opens new tab said on Thursday it expects to offset most of the impact from the 50% tariff U.S. President Donald Trump said he would impose on Brazilian goods partly by adjusting some export routes. Analysts have cited WEG - whose motors are used in vehicles, wind turbines and power transmission lines - among the most exposed firms to the steep tariffs, which are due to take effect on August 1. Sign up here. The company on Wednesday reported lower-than-expected second-quarter results, noting that geopolitical uncertainties have limited long-term visibility and led some clients to postpone investment decisions for large projects. Chief Financial Officer Andre Rodrigues suggested on Thursday the firm could use its Brazilian operations to supply countries such as Mexico and India, whose products would in turn meet U.S. demand. "The execution may take a few months, but once the change is implemented, we expect to be able to mitigate most of these impacts," he told a call with analysts, though warning the move would also depend on the levies Trump imposes on other nations. WEG has plants in over a dozen countries, including the United States and Mexico, and has touted its global presence and broad product portfolio as factors that might help shield it from the tariffs' impacts. Rodrigues said that products made in Brazil currently account for less than a third of WEG's U.S. sales. He noted that the effects on WEG's second-quarter results of the 10% tariff Trump had initially imposed in April were small, saying that the firm made some price adjustments in the U.S. to offset the impact of those levies. "Looking ahead, at this point it's not possible to have a firm stance, given the many uncertainties and volatility in the trade structures being discussed," Rodrigues added. "But if the current situation persists, WEG does have an action plan." https://www.reuters.com/world/americas/brazils-weg-expects-mitigate-most-impacts-trump-tariffs-2025-07-24/

2025-07-24 15:32

FRANKFURT, July 24 (Reuters) - European Central Bank policymakers are setting a high bar for an interest rate cut in September and they would need to see a significant deterioration in growth and inflation before backing further easing, two sources told Reuters. The European Central Bank left interest rates unchanged on Thursday after cutting eight times in a year, biding its time while Brussels and Washington try to negotiate a trade deal that could ease persistent uncertainty over tariffs. Sign up here. But sources at the meeting said that policymakers would not be spurred into action by the mere announcement of U.S. duties on European Union imports. Instead, they would need to see an actual weakening in the inflation and growth data as well as lower projections from ECB staff in September if they are to back a rate cut. An ECB spokesperson declined to comment. While the discussion on Thursday was harmonious, a few policymakers wanted to send out a warning about inflation coming in lower than expected. Instead, the ECB said that risks to economic growth were "tilted to the downside" while "the outlook for inflation (was) more uncertain than usual". ECB President Christine Lagarde hinted at this division, saying that, while the decision to keep rates on hold was unanimous, the risk assessment was "broadly shared". The sources said that policymakers mostly agreed on how the economy would behave in the ECB's baseline scenario, in which the U.S. administration imposes a 10% tariff rate on European Union imports. But they differed about the adverse scenario, in which the tariff rate is higher. Policy hawks, who favour higher interest rates, saw risks that inflation would get a boost from supply disruptions related to tariffs and possible retaliation. Doves saw downside risks from slower economic activity prevailing. Lagarde, who said her job was to present the view of the Governing Council rather than her own, listed both types of risks in her news conference. https://www.reuters.com/business/finance/ecb-policymakers-set-high-bar-sept-rate-cut-sources-say-2025-07-24/

2025-07-24 15:15

MEXICO CITY, July 24 (Reuters) - Mexico's headline inflation slowed in the first half of July, falling back within the central bank's target range and fueling expectations that the bank will continue to cut interest rates in Latin America's second-largest economy. Consumer prices rose 3.55% in the 12 months through mid-July, data from the national statistics agency showed on Thursday, slowing down from the 4.51% reported a month earlier. Sign up here. The figure also undershot the 3.64% expected by economists polled by Reuters. The slowdown in inflation "shows that the Bank of Mexico has room to keep cutting interest rates," President Claudia Sheinbaum said at her regular morning press conference. The Bank of Mexico, which targets an inflation rate of 3% plus or minus one percentage point, lowered its benchmark interest rate by 50 basis points in June - its third straight cut of that magnitude - bringing it to 8.5%, the lowest since August 2022. In the first half of July alone, Mexican consumer prices rose 0.15% compared to the prior two weeks, also below expectations of a 0.27% increase. Analysts at brokerage Monex said the data was a surprise as inflation in the first half of July reached its lowest level for this period in a decade, but emphasized challenges on core inflation. The closely watched core price index, which strips out some volatile food and energy prices, climbed 0.15% in early July, compared with 0.22% a month earlier. The 12-month core rate came in at 4.25%. "Given the stubbornness of core inflation, we expect Banxico to reduce the scale of its cuts: for the August 7 meeting, we estimate that it will cut the benchmark interest rate by 25 basis points to 7.75%," Monex analysts added. https://www.reuters.com/world/americas/mexico-inflation-fall-early-july-reignites-rate-cut-expectations-2025-07-24/