UK BREAKS OFF TRADE CONTACTS WITH ISRAEL (20.05.2025)
The UK government, led by Prime Minister Keir Starmer, has decided to suspend negotiations on a trade deal with Israel in response to the escalating conflict in Gaza and Israel’s blockade of humanitarian aid. The decision marks a turning point in previously friendly bilateral relations and reflects Britain’s condemnation of what it considers an ‘intolerable offensive’.
The British Foreign Office, through public statements and a formal summons to the Israeli ambassador, stressed that the blockade of humanitarian access to Gaza, with only dozens of trucks allowed in, is “indefensible” and has severely damaged Israel’s international image. In particular, London warned that the continuation of these actions could lead to further restrictive measures.
The suspension of trade negotiations has a direct impact on bilateral economic relations, creating uncertainty for future trade, investment and commercial cooperation between the UK and Israel. Furthermore, the announcement of sanctions against individuals and entities linked to illegal settlements signals a hardening of British foreign policy, with possible repercussions for trade flows and international economic cooperation.
The British message aligns with positions of other Western governments such as France and Canada, reflecting a notable shift in commercial and foreign diplomacy that may affect stability and trade alliances in the region..
NEW MULTI-BILLION DOLLAR AGREEMENT BETWEEN THE US AND SAUDI ARABIA (14.05.2025)
On 14 May 2025, the United States and Saudi Arabia signed a historic economic and military cooperation agreement worth more than 600 billion USD. This package includes the largest arms sale in US history, worth nearly $142 billion USD, which will strengthen Saudi Arabia’s air, space, missile defence, maritime security, ground force modernisation, and information and communications systems capabilities.
In addition to arms sales, the agreement includes Saudi investments in strategic sectors in the US, such as data centres, aviation, healthcare and mining. This reinforcement of bilateral cooperation positions Saudi Arabia as a regional military power and strengthens its alliance with the US in a context of tensions with Iran and Houthi attacks in Yemen.
The agreement represents a significant strengthening of economic and military ties between the two countries, with implications for the balance of power in the Middle East region and for US international trade relations.
https://www.bbc.com/mundo/articles/cn84gv806pno
U.S. AND CHINA U.S. AND CHINA REACH AGREEMENT TO REDUCE TARIFFS FROM 145% TO 30% (12.05.2025)
The US and China announced on 12 May an agreement to significantly reduce mutual tariffs over a 90-day period, marking a de-escalation in their long-running trade war. As of 14 May, the US has begun lowering its tariffs on Chinese imports from 145% to 30%, while China has reduced its tariffs on US goods from 125% to 10%. The pact was reached after negotiations in Switzerland, the first since President Donald Trump’s imposition of tariffs.
US Treasury Secretary Scott Bessent stressed that neither side wants economic decoupling, and that both seek more balanced trade. The agreement also establishes an ongoing dialogue mechanism led by Bessent and Chinese Vice Premier He Lifeng to address structural differences such as intellectual property protection and state subsidies.
The news was welcomed by financial markets: Hong Kong’s Hang Seng index rose by 3 per cent, and European and US stock markets were expected to rise. In addition, the price of Brent crude oil rose by more than 3 per cent, reflecting expectations of a boost to global growth. However, significant challenges remain that will require further negotiations to resolve the underlying trade tensions between the two powers.
https://www.bbc.com/mundo/articles/cx2jnr731ewo
US. FIRST TRADE DEAL WITH UK AMID TRUMP’S TARIFF OFFENSIVE (08.05.2025)
On 8 May 2025, the United States and the United Kingdom announced a trade agreement that reduces certain tariffs recently imposed by the Trump administration. The pact provides for lowering the import tax on British cars from 25% to 10% for a quota of 100,000 units per year, benefiting manufacturers such as Jaguar Land Rover and Rolls-Royce.
In addition, it was agreed to allow a percentage of British steel and aluminium to be imported without tariffs, giving relief to key UK industries. However, the US maintains a blanket 10% tariff on most British products.
The agreement also includes reciprocal access for beef exports, with a 13,000 metric tonne quota for British farmers. For its part, the US expects to expand its beef and ethanol sales to the UK, estimating a USD 5 billion business opportunity.
Although no formal agreement was signed and several details remain undefined, the leaders of both countries welcomed the understanding. British Prime Minister Keir Starmer described it as a “fantastic platform”, while President Trump called it a “great deal” and anticipated future trade pacts.
Despite official optimism, some business sectors expressed reservations about the scope of the agreement, pointing out that the new conditions do not significantly alter the terms of bilateral trade prior to the recent tariff offensive.
https://www.bbc.com/mundo/articles/cn05l2jl771o
EU EXECUTIVE CUTS EURO AREA GROWTH FORECASTS DUE TO TRADE WAR WITH US (18.05.2025)
The European Commission has lowered its growth forecast for the euro area, attributing the slowdown to the trade war initiated by the United States and uncertainty over its resolution. Eurozone GDP is expected to grow by 0.9 per cent in 2025, down from a previous estimate of 1.3 per cent. By 2026, growth is projected at 1.4%, also below the 1.6% previously forecast.
This review is based on the assumption that the US will maintain tariffs of 10% on EU products and 25% on specific materials such as steel, aluminium and cars. The Commission warns that global trade fragmentation and climate disasters pose additional risks to economic GDP growth and a pick-up in inflationary pressures.
Despite these challenges, unemployment in the euro area is expected to decline, reaching 6.1% by 2026. Inflation is also expected to moderate, falling to 1.7% in 2026 from 2.4% in 2024.
However, public finances could deteriorate slightly, with the budget deficit rising to 3.3% of GDP in 2026 and public debt reaching 91% of GDP.
The Commission notes that a possible easing of trade tensions or an increase in trade and defence spending could improve the economic outlook. However, persistent uncertainty and risks associated with trade policy remain key determinants of economic developments in the region.
CHINA CUTS KEY INTEREST RATES TO HELP ECONOMY AS TRADE WAR RAGES ON (20.05.2025)
The People’s Bank of China (PBOC) announced on 20 May a cut in its benchmark interest rate for the first time since October 2024, in a bid to stimulate the domestic economy amid persistent trade tensions with the United States. The one-year prime lending rate (LPR) was cut by 10 basis points to 3.0%, while the five-year LPR, key for mortgage lending, was also lowered by 10 basis points to 3.5%.
Simultaneously, China’s major state-owned banks, including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Construction Bank and the Bank of China, cut their deposit rates by 5 to 25 basis points.
Despite these efforts, some analysts express scepticism about China’s ability to achieve its 5% GDP growth target without significant additional stimulus. Recent data show stagnating house prices and weaker than expected loan demand, reflecting continuing challenges in the country’s economic recovery.
In addition, the reduction in deposit rates has pushed one-year rates below 1% for the first time, which could encourage savers to move their funds into the equity market. While this could boost consumer confidence and economic activity, it also poses risks to financial stability, especially in a context of historically low net interest margins and weak credit demand.
While the measures taken by the PBOC and state-owned banks represent a step towards monetary easing, the effectiveness of these actions will depend on the evolution of trade tensions and the Chinese government’s ability to implement additional policies to strengthen the economy.
THE BANK OF SPAIN BELIEVES THAT THE TARIFF WAR WILL HAVE A LIMITED IMPACT ON SPAIN, BUT WARNS OF UNCERTAINTY (20.05.2025)
The Bank of Spain estimates that the US-driven trade war will have a limited direct impact on the Spanish economy due to its low exposure to the US market. However, it warns that high global uncertainty could indirectly affect investment, consumption and exports, especially in sectors such as automotive components and agri-food products.
The annual report notes that, although the average tariff for Spanish products in the US has increased from 3% to 12%, and could rise to 18%, the direct effect on Spanish GDP would be about one tenth of a percentage point on average over three years. However, if there is a deterioration in financial conditions or an increase in uncertainty, the negative impact could be amplified by up to an additional 0.3 percentage points on GDP.
Moreover, the Bank of Spain stresses that the national economy faces structural challenges such as productivity deficits, housing shortages and high public debt, which stands at 101% of GDP. The institution calls for an ambitious reform agenda to strengthen investment, human capital and the fiscal and institutional framework in the medium term.
The report also warns of the risk of the dollar losing its role as a global financial anchor, which could have consequences for global financial stability.
POLITICAL AND ECONOMIC PROSPECTS OF THE NEW SILK ROAD (05.2025)
The New Silk Road, a global initiative led by China since 2013, seeks to strengthen international connectivity through investments in infrastructure, transport, energy and technology, thus promoting trade and economic development. Up to date, 146 countries have joined the project, including 20 from Latin America, such as Argentina, Chile, Peru and Venezuela. Colombia, although it has not yet formalised its membership, has expressed its intention to join in the near future.
Analysts note that participation in this initiative can offer Latin American countries access to financing for infrastructure projects and greater integration into global supply chains. However, they also warn of potential risks, such as economic dependence and geopolitical implications. For example, Panama withdrew from the agreement in February 2025, citing pressure from the US to reduce Chinese influence in the region.
Experts point out that Memorandums of Understanding signed in the framework of the Silk Road are not legally binding and do not compromise the sovereignty of the signatory countries. However, they emphasise the importance of carefully assessing the terms of cooperation in order to avoid possible disadvantages in the long run.
The New Silk Road represents an opportunity for Latin America to diversify its economic relations and access new markets. However, it is crucial that countries in the region carefully analyse the associated benefits and risks, ensuring that any agreement contributes to sustainable development and respects their autonomy.
BRICS TRADE MINISTERS MEETING: INDIA CALLS FOR REMOVAL OF EXPORT CONTROLS ON MEMBER COUNTRIES (23.05.2025)
At the 15th BRICS trade ministers’ meeting, held on 21 May 2025 under the chairmanship of Brazil, India urged member countries to dismantle export controls within the block, with the aim of boosting trade and strengthening critical supply chains.
Yashvir Singh, economic advisor to India’s Department of Commerce, represented India at the meeting and stressed the need to remove restrictive trade measures that disrupt essential supply chains. India used the platform to oppose export controls among BRICS members, encouraging mutual support within the block.
In addition, India presented its “30 by 30” proposal, which seeks 30 incremental improvements to mark the 30th anniversary of the World Trade Organisation (WTO) in 2025. This initiative aims to address outstanding development issues and promote a fairer and more inclusive multilateral trading system.
India also urged developed nations to ensure concessional transfer of Environmentally Sustainable Technologies (ESTs), backed by adequate financial resources. The country reaffirmed its commitment to global cooperation in Digital Public Infrastructure (DPI), artificial intelligence and cybersecurity through forums such as the Global Partnership on AI (GPAI) and the G20.
India will assume the BRICS presidency in 2026 and praised the Brazilian presidency’s solution-oriented approach to addressing critical trade issues.
SOUTHEAST ASIAN LEADERS SEEK BREAKTHROUGH ON MYANMAR PEACE AND TRADE STRATEGIES IN THE FACE OF GLOBAL TENSIONS (26.05.2025)
At the 46th Association of Southeast Asian Nations (ASEAN) summit in Kuala Lumpur, national leaders sought to revive dialogue with Myanmar’s military government to end the protracted civil war that has gripped the country since the 2021 coup. Malaysia, as the rotating chair of ASEAN, proposed to continue separate talks with both the military junta and armed opposition groups, with the aim of encouraging direct negotiations between the warring parties.
Malaysian Foreign Minister Mohamad Hasan announced the intention to discuss the appointment of a permanent ASEAN envoy for Myanmar, with a possible three-year term, as part of efforts to mediate the conflict. Since 2021, the leader of Myanmar’s military junta, Min Aung Hlaing, has been excluded from the ASEAN summit in response to the coup.
At the same time, ASEAN leaders addressed rising trade tensions stemming from US President Donald Trump’s tariff threats. Six Southeast Asian countries face the prospect of significantly higher tariffs than previously seen, between 32% and 49%, from July unless negotiations with Washington on their reduction are successful.
Philippine President Ferdinand Marcos Jr. stressed the need for member states to find consensus on the various economic situations they face in order to present a unified stance in negotiations with the United States. Marty Natalegawa, former Indonesian foreign minister, warned of the risk of a spiral of losses in the region if key principles are not established to guide individual negotiations with the United States.
In addition, the summit included discussions on disputes in the South China Sea, a key route for global maritime trade. China claims sovereignty over much of this sea lane, which has led to tensions with ASEAN members such as the Philippines, Vietnam and Malaysia, who have protested the activities of Chinese vessels in their exclusive economic zones.
https://www.asahi.com/ajw/articles/15794177
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In Madrid, 31 May 2025
International Trade and Sanctions Department
Lupicinio International Law Firm
