Deals & Negotiations

MONETARY

• At the conclusion of the July FOMC, the Federal Reserve opted to leave its Target Federal Funds Rate unchanged at a range of 425-450bps, a move that was widely expected. Chairman Jerome Powell offered commentary on the state of the economy as well¹
  • Reflecting on the state of the labor market, Powell noted ongoing strength and better balance¹
    • (Powell) “In the labor market, conditions have remained solid. Payroll job gains averaged 150 thousand per month over the past three months. The unemployment rate, at 4.1 percent, remains low and has stayed in a narrow range over the past year. Wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment.”¹
  • Powell noted that inflationary effects have changed in terms of composition, with some upward pressure on goods prices from tariffs but with easing on services prices. Some degree of short-term uncertainty on prices has emerged, however longer-term expectations of inflation remain well anchored.¹
    • (Powell) “…although the underlying composition of price changes has shifted: services inflation has continued to ease, while increased tariffs are pushing up prices in some categories of goods. Near-term measures of inflation expectations have moved up, on balance, over the course of this year on news about tariffs, as reflected in both market-based and survey-based measures. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal.”¹
    • (Powell) “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short-lived—reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.”¹
  • Regarding the passing through of tariffs to consumer-facing prices, Powell noted that the effect will take time to materialize, but that foreign exporters and domestic companies have absorbed most of the tariff costs so far¹
    • (Powell) “And the evidence seems to be mostly not paid — paid only to a small extent through exporters lowering their price and companies or retailers sort of people who are upstream — institutions that are upstream from the consumer are paying most of this for now. Consumers are — it’s starting to show up in consumer prices, as you know, in the June report. We expect to see more of that. And we know from surveys that companies feel that they have every intention of putting this through to the consumer. But the truth is they may not be able to in many cases”¹
  • Powell also noted the changing composition of inflation in the sense that services inflation has moderated, while some recent upward pressure in goods has transpired¹
    • (Powell) “But we the composition as I mentioned has really changed. And if you go back to the last couple of years, it was all about services inflation, which was being very sticky. Now services inflation is coming down nicely. Goods inflation was well-behaved before and now goods inflation is going up”¹
  • Chairman Powell also alluded to the concept that inflation (after adjusting for certain items) is practically already at the target 2.0% level¹
    • (Powell) “Look, I think inflation is most of the way back to 2%. There are things like the catch-up inflation. So, for example, all the insurance costs that are now, they’re only now going through inflation, but they actually reflect inflationary pressures from two, three years ago. So, that’s got to go through. In addition, now we have three-tenths or four-tenths of inflation in core inflation from tariffs and we can’t really separate that out. We’re not going to have a separate, kind of, inflation that isn’t the tariffs. We’re always going to be dealing with the whole, all of inflation.”¹

GEOPOLITICS

• After much negotiation, Trump Administration reaches a trade agreement with South Korea²
  • Under the terms of the deal, the United States will impose a 15% tariff rate on goods imported from South Korea, a downtick from the previously threatened 25%²
  • Additionally, South Korea agreed to invest $350 billion in the United States in projects selected by Trump and to purchase energy products worth $100 billion²
  • While comprehensive details about the deal are still unknown, South Korea appears to have avoided substantial changes to its non-tariff barriers put in place to protect its domestic industries²
• Trump Administration comes to an agreement with the European Union over international trade and tariffs³
  • Under the agreement, the United States will impose a 15% tariff rate on most goods imported from the European Union³
  • Additionally, the European Union has agreed to buy $750 billion of American energy products over three years and invest an additional $600 billion in the U.S.³
  • President Trump signaled in comments that the global steel and aluminum tariffs would remain unchanged at the 50% level, while von der Leyen told media that the two sides had agreed to a quota system allowing a certain level of steel and aluminum to enter the U.S. at a reduced tariff level³
  • The EU will completely remove significant tariffs on U.S. industrial goods exported to the EU as part of the agreement as well³
• Trump Administration reaches a trade deal agreement with Japan, reducing the implemented tariff rate on both countries and providing for additional investment in the United States⁴
  • Japanese exports will be subject to a 15% tariff, reduced from the 25% tariff rate threatened in Trump’s July 7 letter⁴
  • Japan will also invest $550 billion in the United States⁴
    • These investments would come in areas important to economic security, such as semiconductors, pharmaceuticals, steel, shipbuilding, critical minerals, energy, automobiles, and AI technologies⁴
  • Japanese government has clarified that it will retain its long-standing 770,000-ton quota of tariff-free rice imports, but it will increase the share of U.S. rice imported within that quota⁴
  • Regarding autos, Japan will accept vehicles built to U.S. safety standards without subjecting them to additional requirements, removing what has long been seen as a nontariff barrier to U.S. companies⁴
  • As part of the deal, Japan will also buy $8 Billion worth of S. agricultural products and also commit to purchasing a sizeable amount of U.S. aircraft⁴

[See Below for Disclosures & Annotations]

DISCLOSURES

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.

Tax laws and regulations are complex and subject to change, which can materially impact investment results. LPL Financial does not provide tax advice. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

ANNOTATIONS

1. The Federal Reserve. “Transcript of Chair Powell’s Press Conference Opening Statement”. July 30, 2025
2. Reuters. “Trump says US will set 15% tariff on South Korean imports under new deal”. July 31, 2025
3. The Wall Street Journal. “Companies Welcome EU-U.S. Trade Deal as Least Bad Outcome”. July 28, 2025
4. CSIS. “Assessing the U.S.-Japan Trade Deal Announcement”. July 23, 2025