Japan saw export growth accelerate in July alongside widening trade imbalances, while European authorities warned that China now operates directly in 40 per cent of its strongest sectors.
Provisional figures show exports from Japan rose 23.2 per cent in July while imports grew 27.8 per cent, driving a trade deficit to 634.5 billion yen, more than four times the gap a year earlier. Shipments to regional markets in Asia rose 24.5 per cent and exports to the US grew 22.0 per cent, though imports from the US expanded much faster at 58.0 per cent. This highlights the ongoing complexity of global trade flows amid shifting domestic demand and currency valuations.[1]
In Europe, central bank officials noted that China now competes directly in close to 40 per cent of the sectors where the euro area holds a comparative advantage, up from about 25 per cent two decades ago. Energy-intensive industries face electricity prices more than twice those in the US and around 50 per cent above China. This structural shift is prompting policymakers to evaluate the long-term competitiveness of the bloc's manufacturing base.[2]
As trade restrictions increase globally, researchers at the Federal Reserve Bank of Boston found that labour productivity gains offset much of the inflation impact from tariffs introduced in 2025. While average realised tariffs rising to 10 per cent added 1.1 percentage points to production costs, productivity improvements cut unit costs by 1.3 percentage points, limiting the pass-through to consumer prices. This dynamic suggests that domestic efficiency improvements can serve as a crucial buffer against external cost shocks.[3]
