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Seoul’s runaway property market puts Korean central bank in a bind

Policymakers fear cutting borrowing costs to boost economic growth could drive capital’s real estate prices higher


Property prices in Seoul, led by the upscale southern districts in Gangnam, have persistently climbed © Anthony Wallace/AFP/Getty Images

South Korean policymakers are struggling to stimulate economic growth in the face of an escalating global trade war, as they fear cutting interest rates could boost property prices in some of the most desirable parts of Seoul and inflame an already overheated market.

The Bank of Korea on Thursday held rates at 2.5 per cent, defying pressure to boost an economy that contracted in the first quarter as US President Donald Trump’s tariffs squeezed the country’s crucial exports of cars, steel and electronics.

“The BoK wants to cut rates to boost the economy, but it is concerned that lower rates will create bubbles in the property market, hurting financial stability,” said Park Chong-hoon, head of research at Standard Chartered in Seoul. “The runaway property market in Seoul and high household debt are limiting their policy options.”

South Korea’s new leftwing President Lee Jae Myung has pledged to revive the economy following a prolonged period of slowing growth. The economy also faces US tariffs, competition from low-cost Chinese exporters and political turmoil following the impeachment of his conservative predecessor, Yoon Suk Yeol.

Factory activity contracted in June for a fifth consecutive month, prompting the government to warn of persistent economic risks due to uncertainties around US tariffs. This week, Trump reiterated that South Korea would face a blanket 25 per cent tariff on its exports if it failed to reach a trade deal by August 1.

Last week, Lee’s ruling Democratic party passed a $23bn fiscal stimulus package, including the distribution of cash vouchers ranging in value from $110-$410 to all South Koreans.

But economists warn that deeper structural reforms will be required to address slowing productivity and a looming demographic crisis. The OECD this month forecast a potential growth rate for 2025 of less than 2 per cent for the first time since 2001.

BoK governor Rhee Chang-yong last month acknowledged the difficulty of stimulating growth without overheating the property market.

He said the BoK would maintain an “accommodative monetary policy stance for the time being” but warned that “excessively lowering the base rate would likely fuel housing price hikes in the Seoul metropolitan area, rather than support a recovery in the real economy”.

Last month, Nomura warned that the looser financial conditions driving the housing market rally were contributing to rising household debt, which at Won1,927.3tn ($1.3tn) last year was 92 per cent of GDP, one of the highest in the developed world.

“With overheated housing markets in Seoul and rising household leverage testing the BoK’s tolerance for financial imbalances, we expect the BoK to quickly shift its policy focus back towards financial stability,” Park Jeong-woo, an economist at Nomura, said in the report.

Led by the upscale southern districts in Gangnam, prices surged last month at their highest weekly rate in nearly seven years, matching the pace of growth during a previous boom in 2018, even as the market remains stagnant in areas outside Seoul.

The BoK said on Wednesday that housing loans in June had risen by $4.5bn — the biggest jump in nine months — with lending growing by more than 4 per cent year on year in each of the past four months.

Lee wants to encourage Koreans to invest in the stock market instead of property, telling reporters he was “determined to reverse the speculative forces that are distorting the housing market”. His government has already rolled out measures aimed at cooling prices, including a Won600mn mortgage cap and tightened lending rules.

But Park of Standard Chartered cautioned that any gains from the stock market would flow back into property, “as Koreans have strong faith that property investments are much safer than stock investments”.

Stabilising the property market is critical for the new government. Runaway prices in metropolitan Seoul are widely seen as having contributed to the Democratic party’s loss in previous presidential elections in 2022.

One of the biggest failures of that administration “was its inability to rein in the skyrocketing property market in Seoul”, said Shin Yul, a professor of politics at Myongji University. “You can’t stabilise the property market by just trying to curb demand without increasing supply.”

Many South Koreans remain determined to put their money in housing.

“People believe that property prices will go up again because they have always done so under the previous liberal governments,” said Nomura’s Park. “There is fear that this may be their last chance to buy a house, given the current supply shortages in Seoul. Many of them are still convinced that property investments never fail.”

Nvidia becomes first company to reach $4tn in market value

Trump: Fed rate is at least 3 points too high

United States President Donald Trump claimed on Wednesday that the interest rates are "AT LEAST 3 points too high." He also repeated the allegation that Federal Reserve Chair Jerome Powell is "costing the US 360 Billion Dollars a Point" per year in refinancing costs. Trump also argued that there is "no inflation" and that businesses are "POURING INTO AMERICA" and urged the Fed to "LOWER THE RATE!!!"

Earlier today, Trump said he would pick "anybody" but Powell as the Fed chair. He has been critical of Powell since taking office, pressuring him to cut rates by at least 1 percentage point. The Fed held the rates steady at 4.25%-4.50%.

ECB's de Guindos hopes euro will stabilize soon

European Central Bank (ECB) Vice President Luis de Guindos expressed on Wednesday his hope that the euro's exchange rate will stabilize soon and cease to impact the Eurozone's economic growth.

"It is important to take it into account, monitor it without setting any kind of reference level," de Guindos said before the Escorial Royal University Center (RCUEMC). "But well, let us hope it will stabilise somewhat and that it will not have any further negative impact from the point of view of ... economic growth."

Recently, de Guindos noted that the euro could become a global reserve currency, if necessary, and if the ECB acted swiftly on the matter.

Home sellers have gotten tired of cutting prices. So they’re yanking their houses off the market.

Delistings are growing faster than the number of homes for sale, Realtor.com says — indicating frustration among sellers


Sluggish local housing markets have gotten more and more frustrating.
Photo: Getty Images
Home sellers in some of the nation’s most sluggish housing markets are tired of cutting prices. So they’re yanking their listings off the market.

Amid a multidecade slowdown in the housing market, home sellers in some areas are giving up. With few buyers looking to buy and a lack of demand, these owners are choosing to remove their homes from the market and wait it out instead.

In May, there were relatively elevated shares of delisted homes in metro areas including Miami–Fort Lauderdale–West Palm Beach in Florida, Phoenix-Mesa-Chandler in Arizona, and Houston–Pasadena–The Woodlands in Texas, according to a new analysis by Realtor.com.

The increase in delistings is “an early signal that sellers may be losing patience in a market that’s taking longer to deliver desired offers,” the report said.

The share of houses that were taken off the market in May grew faster than the increase in the number of houses that were put up for sale, according to the report. In other words, more homeowners were delisting a home than listing one, the data showed.

Between last May and this May, delistings rose 47% while active-listing growth increased by about 32%. Delistings are also becoming slightly more common: They made up about 3.2% of all active listings last May, but are now about 4.1%.

The shift in sentiment among sellers comes as the housing market flips from a seller-friendly market to a buyer-friendly one. In years past, inventory was scarce, while now there’s oversupply in some markets.

The housing market is oversupplied in Arizona, Florida and Texas

That oversupply is partly due to builders adding newly constructed homes to the market. In many cities in Arizona, Florida and in Texas, for-sale listings have surged largely due to these newly built homes.

With more homes for sale, prices are pressured downward, because demand hasn’t changed all that much. In June, the median listing price was $440,950, up only 0.1% from a year ago. About 21% of listings in June had seen a price cut, which was the highest for that month since at least 2016, when Realtor.com began tracking the data.

Pulling homes off the market instead of getting into a downward spiral of price reductions in part “helped slow broader price declines,” the company said.

Eric Ravencroft, a Phoenix-based real-estate agent with the Real Broker, has been talking about delisting as a strategy with some of his clients. When talking to sellers, he advises that “it’s going to take time. It could even take up to six months for it to sell, but you need to have a plan,” the agent told MarketWatch.

If the home doesn’t get a good offer price, he suggests that owners rent it out. “A lot of people are carrying low rates, [and] they have a lot of equity,” he added, so they can rent it and earn rental income for some time.

Little downside to delisting, agent says

To be sure, seasonality plays a role in delistings, Ravenscroft, the Phoenix agent, said. Some sellers leave their home city in the summer, so they pull their listing while they’re gone, for instance.

But market dynamics are also impacting sellers’ decisions.

Builders are formidable foes for homeowners selling their homes. Unlike homeowners, builders have a lot more financial firepower through which to lure buyers. They are able to offer teaser mortgage rates as low as 3.99%, which is well below the current average rate of nearly 7% on 30-year loans. That’s hard for homeowners to compete with, Ravenscroft said.

Some sellers who decide to delist are facing little pressure to sell. For instance, people who are looking to buy a bigger home or want to downsize are not necessarily pressed to sell immediately, he said, because because “it’s not a need-to-sell; it’s more of a let’s-try-to-sell.”

Ravenscroft sees little downside to delisting a home if a seller isn’t feeling an urgency to sell, he said.

A common tactic is to delist a home and then relist at a later time. The seller can wait a few months before relisting. That resets the number of days the home has been on the market, which can be a red flag to buyers if that market-time figure is viewed as suspiciously long. The home then presents itself as a “fresh” listing and catches more eyeballs — and, it’s hoped, better offers.

But don’t expect the housing market to change dramatically if you decide to delist and wait it out, Matthew Morrison, a designated broker at Retsy/Forbes Global Properties, told MarketWatch.

“Delisting can be a useful reset button, but it’s not a strategy by itself. It may make sense temporarily while reassessing marketing, pricing or condition, especially in the Arizona luxury market, where it can be strategic,” he explained.

“If you’re serious about selling, refining your pricing and marketing is often a more effective path than hitting pause,” he added.

Across Europe, the financial sector has pushed up house prices. It’s a political timebomb, Tim White

We’ve been living in a great experiment: can finance provide basic human rights such as housing? The answer is increasingly no

“The housing crisis is now as big a threat to the EU as Russia,” Jaume Collboni, the mayor of Barcelona, recently declared. “We’re running the risk of having the working and middle classes conclude that their democracies are incapable of solving their biggest problem.”

It is not hard to see where Collboni is coming from. From Dublin to Milan, residents routinely find half of their incomes swallowed up by rent, and home ownership is unthinkable for most. Major cities are witnessing spiralling house prices and some have jaw-dropping year-on-year median rent increases of more than 10%. People are being pushed into ever more precarious and cramped conditions and homelessness is rapidly rising.

As Collboni asserts, housing lies at the heart of surging political disfranchisement across mainland Europe. The crisis is fuelling the far right – linked, for example, to the support for Alternative für Deutschland in Germany and the recent victory of the Dutch anti-Islam Freedom party. Housing has become a primary engine of inequality, reinforcing divisions between the asset-haves and have-nots and disproportionately affecting minority groups. Far from offering security and safety, for many in Europe housing is now a primary cause of suffering and despair.

But not everyone is suffering. At the same time it is robbing normal people of a comfortable and dignified life, the housing crisis is lining the pockets of a small number of individuals and institutions. Across Europe in recent decades the same story has unfolded, albeit in very different ways: power has shifted to those who profit from housing, and away from those who live in it.

The most striking manifestation of this shift is the large-scale ownership and control of homes by financial institutions, particularly since the 2008 global financial crisis. In 2023, $1.7tn of global real estate was managed by institutional investors such as private equity firms, insurance companies, hedge funds, banks and pension funds, up from $385bn in 2008. Spurred by loose monetary policy, these actors consider Europe’s housing a particularly lucrative and secure “asset class”. Purchases of residential property in the euro area by institutional investors tripled over the past decade. As a London-based asset manager puts it: “Real estate investors with exposure to European residential assets are the cats that got the cream,” with housing generating “stronger risk-adjusted returns than any other sector”.

The scale of institutional ownership in certain places is staggering. In Ireland, nearly half of all units delivered since 2017 were purchased by investment funds. Across Sweden, the share of private rental apartments with institutional investors as landlords has swelled to 24%. In Berlin, €40bn of housing assets are now in institutional portfolios, 10% of the total housing stock. In the four largest Dutch cities, a quarter of homes for sale in recent years were purchased by investors. Even in Vienna, a city widely heralded for its vast, subsidised housing stock, institutional players are now invested in every 10th housing unit and 42% of new private rental homes.

Not all investors are the same. But when the aim is to make money from housing it can mean only one thing: prices go up. As Leilani Farha, a former UN special rapporteur, points out, investment funds have a “fiduciary duty” to maximise returns to shareholders, which often include the pension funds on which ordinary people rely. They therefore do all they can to increase prices and reduce expenditure, including via “renoviction” (using refurbishment as an excuse to hike rents), under-maintenance and the introduction of punitive fees. When the private equity giant Blackstone acquired and renovated homes across Stockholm, it increased rents on some of the homes by up to 50%, the economic geographer Brett Christophers found. “Green” retrofits in the name of sustainability are also an increasingly common tactic.

The corporate capture of our homes has not sprung out of thin air. Decades of housing market privatisation, liberalisation and speculation have enabled the financial sector to tighten its grip on European households. From the 1980s in places such as Italy, Sweden and Germany, government-owned apartments were transferred en masse to the private market. In Berlin, for example, vast bundles of public housing were sold overnight to large corporations. In one single transaction, Deutsche Wohnen purchased 60,000 flats from the city in 2006 for €450m; just €7,500 per apartment.

With the role of welfare states in housing provision dismantled, many countries reached for demand-side interventions such as liberalising mortgage credit. This fuelled widespread speculation, pushed up house prices and encouraged extreme levels of household indebtedness. The resulting financial crisis of 2008 provided fresh opportunities for investors. Countries such as Spain, Greece, Portugal and Ireland became a treasure trove of “distressed” assets and mortgage debt that could be scooped up at bargain prices. Despite the widespread devastation caused by the crisis, Europe’s dependence on the financial sector for housing solutions only intensified in the years that followed.

As power has shifted to investors and speculators, and governments have become ever more reliant on them, so it has been withdrawn from residents. In order to incentivise or “de-risk” private investment, governments across Europe have weakened tenant protections, slashed planning regulations and building standards, and offered special subsidies, grants and tax breaks for entities such as real estate investment trusts. One group in particular has borne the brunt of this: renters. Renters have seen their rents skyrocket, living conditions deteriorate and their security undermined. In Europe, some investment funds have directly driven the displacement of lower-income tenants and overseen disruptive evictions.

Powerful financial actors have done a great job at framing themselves as the solution to, rather than the cause of, the prevailing crisis. They have incessantly pushed the now-dominant narrative that more real estate investment is a good thing because it will increase the supply of much-needed homes. Blackstone, for example, claims to play a “positive role in addressing the chronic undersupply of housing across the continent”. But the evidence suggests that greater involvement of financial markets has not increased aggregate home ownership or housing supply, but instead inflated house prices and rents.

The thing is, institutional investors aren’t really into producing housing. It is directly against their interests to significantly increase supply. As one asset manager concedes, housing undersupply is bad for residents but “supportive for cashflows”. Blackstone’s president famously admitted that “the big warning signs in real estate are capital and cranes”. In other words, they need shortages to keep prices high.

Where corporate capital does produce new homes, they will of course be maximally profitable. Cities such as Manchester, Brussels and Warsaw have experienced a proliferation of high-margins housing products such as micro-apartments, build-to-rent and co-living. Designed with the explicit intention of optimising cashflows, these are both unaffordable and unsuitable for most households. Common Wealth, a thinktank focusing on ownership, found that the private equity-backed build-to-rent sector, which accounts for 30% of new homes in London, caters predominantly to high-earning single people. Families represent just 5% of build-to-rent tenants compared with a quarter of the private rental sector more broadly. These overpriced corporate appendages are a stark reminder of the market’s inability to deliver homes that fit the needs and incomes of most people.

While housing lies at the heart of political disillusionment today, it is for the same reason becoming a primary trigger for mobilisation across Europe. In October 2024, 150,000 protesters marched through the streets of Madrid demanding action. Some governments, including Denmark and the Netherlands, are introducing policies to deter speculators. But real estate capital continues to hold the power, so it continues to get its way – including by exploiting loopholes, and lobbying against policies that put profits at risk. In 2021, Berliners voted in favour of expropriating and socialising apartments owned by stock-listed landlords. But under pressure from the real estate lobby, politicians have stalled this motion. That same year Blackstone – Spain’s largest landlord with 40,000 housing units – opposed plans to impose a 30% target for social housing in institutional portfolios. Struggles against the immense structural power of real-estate interests will be hard fought.

In recent decades we have been living through an ever-intensifying social experiment. Can housing, a fundamental need for all human beings, be successfully delivered under the machinations of finance capitalism? The evidence now seems overwhelming: no.

As investors have come to dominate, so the power of residents has been systematically undermined. We are left with a crisis of inconceivable proportions. While we can, and should, point the finger at corporate greed, we must remember that this is the system working precisely as it is set up to do. When profit is the prevailing force, housing provision invariably fails to align with social need – to generate the types of homes within the price ranges most desperately required. In the coming years, housing will occupy centre stage in European politics. Now is the time for fundamental structural changes that reclaim homes from the jaws of finance, re-empower residents and reinstate housing as a core priority for public provision.

Tim White is a research fellow at Queen Mary University of London and the London School of Economics studying housing, cities and inequality

Investors snap up growing share of US homes as traditional buyers struggle to afford one

Real estate investors are buying a larger share of U.S. homes as high prices and borrowing costs deter traditional buyers

LOS ANGELES -- Real estate investors are snapping up a bigger share of U.S. homes on the market as rising prices and stubbornly high borrowing costs freeze out many other would-be homebuyers.

Nearly 27% of all homes sold in the first three months of the year were bought by investors -- the highest share in at least five years, according to a report by real estate data provider BatchData.

Between 2020 and 2023, the share of homes bought by investors averaged 18.5%.

All told, investors bought 265,000 homes in the January-March quarter, an increase of 1.2% from the same period a year earlier, the firm said.

Despite the modest annual increase, the rise in the share of investor home purchases is more a reflection of how much the housing market has slowed as traditional buyers face growing affordability constraints, according to BatchData.

The U.S. housing market has been in a sales slump since early 2022, when mortgage rates began to climb from pandemic-era lows. Home sales fell last year to their lowest level in nearly 30 years.

They’ve remained sluggish so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, though more slowly.

As home sales have slowed, properties are taking longer to sell. That's led to a sharply higher inventory of homes on the market, benefitting investors and other home shoppers who can afford to bypass current mortgage rates by paying in cash or tapping home equity gains.

“As traditional buyers struggle with affordability, investors with cash and financing advantages are stepping in to maintain transaction volume,” according to the report.

BatchData analyzes U.S. home sales records to determine which properties were purchased by investors. These could include vacation homes or rentals, but not a homebuyer’s primary residence.

Investors bought 1.2 million homes in 2024, up from an average of 1.1 million homes a year going back to 2020, according to BatchData.

Even so, investor-owned homes account for roughly 20% of the nation's 86 million single-family homes, the firm said.

Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.

Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.

And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.

Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs.

China’s Housing Crisis Is Worse Than It Seems



By fueling demographic collapse, Japan’s short-sighted approach to ending its “lost decades” has set the stage for “lost centuries.” Now, Chinese policymakers – who are facing an even more severe housing and demographic crisis – are at risk of making the same mistakes.

MADISON, WISCONSIN – China’s economy today bears an unsettling resemblance to Japan’s in the 1990s, when the collapse of a housing bubble led to prolonged stagnation. But Japan’s “lost decades” were not the inevitable result of irreversible trends; they reflected policy blunders, rooted in a flawed understanding of the challenges the economy faced. Will Chinese policymakers make the same mistakes?

Japan’s housing bubble was preceded by sharply rising ratios of home prices to annual income, with Tokyo’s surging from eight in 1985 to 18 in 1990. This trend was driven by a number of factors, including Japan’s land-tax policy, financial deregulation, and poor coordination of fiscal and monetary policy. But demand from first-time homebuyers – aged 39-43, on average – also made a substantial contribution.



Because homeowners felt wealthier, they consumed more. This drove up the prices of goods, services, and stocks, leading to more jobs and less unemployment. But demand for new housing soon began to fall, and demographic shifts were a key factor. In 1991, as the share of Japan’s population aged 65 and older reached 13%, the number of first-time homebuyers began to decline. Property values plummeted, the stock market collapsed, and Japan fell into a deflationary trap, characterized by falling fertility and rising unemployment.



A misdiagnosis of the problem made matters much worse: what was actually a chronic demographic disease was treated as an acute illness. Policymakers believed that Japan was grappling with yen appreciation as a result of the 1985 Plaza Accord, under which the world’s major economies agreed to devalue the dollar. So, to stem the currency’s rise, they printed money, lowered interest rates, increased the government deficit, and engaged in quantitative easing.

These policies, together with the rebound in the number of new homebuyers that began in 2001, caused home prices to start rising again – and exacerbated the underlying disease. As starting a family became more expensive, young people delayed marriage and had fewer children. The government tried to boost birth rates with interventions like increased child allowances and improved childcare services, but it achieved only limited success: the fertility rate rose from 1.26 births per woman in 2005 to a mere 1.45 a decade later.

At that point, then-Prime Minister Abe Shinzō set the goal of lifting the fertility rate to 1.8. But the relevant measures – which sought, for example, to make it easier for women to return to work after giving birth – could not offset the effects of the accommodative monetary policies that were viewed as vital to combat deflation and stimulate economic growth. Home prices continued to soar, marriages declined further, and births plummeted. Last year, Japan’s fertility rate amounted to just 1.15 births per woman.

In the past, Japan welcomed low interest rates and a weak yen, because its economy was highly dependent on exports. But the aging and shrinking of its labor force have generated upward pressure on wages, fueling domestic inflation, weakening manufacturing, and transforming Japan from a surplus country into a deficit country, thereby making it vulnerable to imported inflation. So, Japan has escaped its deflationary trap only to become ensnared in a long-term inflationary trap, which, by reducing purchasing power and parenting capacity, will reduce fertility further. By fueling a demographic collapse, Japan’s approach to ending its “lost decades” has set the stage for “lost centuries.”

This should serve as a cautionary tale for China, which is confronting real-estate and demographic crises of its own. In recent decades, rapid urbanization, policy-induced artificial land scarcity, the dependence of local governments on land sales for revenue, and heady expectations of future growth caused real-estate prices to soar. Strong demand from first-time homebuyers also helped: since young Chinese typically have no siblings, owing to decades of fertility restrictions, they tend to purchase their first home about 11 years earlier than their Japanese counterparts.

But the number of Chinese urban dwellers aged 28-32 peaked in 2019 – and the real-estate bubble burst shortly thereafter. Now, the real-estate sector – which, at its 2020-21 peak, contributed 25% of total GDP and 38% of government revenue – is blighted by weak demand, falling construction, and severe overcapacity. Declining prices have decimated household wealth, with losses equivalent to China’s annual economic output. This has undermined consumption, employment, borrowing, and investment.

The crisis that is brewing in China is more severe than the one Japan faced. For starters, China’s housing bubble is much larger. For example, residential investment, as a share of GDP, was about 1.5 times higher in China in 2020 than in Japan in 1990. Property accounted for about 70% of Chinese households’ total assets in 2020, compared to around 50% in Japan in 1990. China’s price-to-income ratio today is more than twice that of Japan in 1990.

Moreover, China’s fertility rate is lower. Whereas Japan experienced a second surge of first-time homebuyers a decade after the first, China can look forward to no such thing. The share of the population over the age of 65 is increasing much faster in China than it did in Japan: it took Japan 28 years to get where China will get between now and 2040. During that period (1997-2025), Japanese GDP growth averaged just 0.6% annually.

Finally, China faces much greater deflationary and unemployment pressures than Japan did. Chinese household consumption accounted for only 38% of GDP in 2020, compared to 50% in Japan in 1990.

But perhaps the most ominous portent is that China’s government continues to tout a potential growth rate of 5%, with some prominent figures suggesting that it could achieve rates as high as 8%. To get there, policymakers are pursuing measures with high short-term returns – such as expanding the supply of affordable housing and carrying out quantitative easing – while all but ignoring the economy’s weak fundamentals. As Hegel famously put it, “The only thing we learn from history is that we learn nothing from history.”

Yi Fuxian, a senior scientist at the University of Wisconsin-Madison, spearheaded the movement against China’s one-child policy and is the author of Big Country with an Empty Nest (China Development Press, 2013), which went from being banned in China to ranking first in China Publishing Today’s 100 Best Books of 2013 in China.

Trump tariffs live updates: Trump says he won't extend August 1 deadline after letters to Japan, South Korea, others

(...)Meanwhile, China warned Trump on Tuesday against restarting trade tensions and that it would hit back at countries that make deals with the US to exclude China from supply chains.

Last month, the US and China agreed on a trade framework to ease tensions, but many details remain vague. Investors are now waiting to see if this agreement can withstand a new round of trade brinkmanship.

"One conclusion is abundantly clear: dialogue and cooperation are the only correct path," the official People's Daily said in a commentary, referring to the exchanges in the current round of China-US trade tension.

Trump: We're getting along with China really well

United States President Donald Trump expressed on Tuesday his belief that "we're getting along with China really well" concerning the talks about the two countries' trade relations.

Speaking to the press during the meeting with his cabinet, Trump pointed out frequent conversations with his Chinese counterpart Xi Jinping. He also praised Beijing for being "very fair" in the ongoing negotiations about a trade deal.

Still, Trump also noted the importance of the US being dominant in researching and developing artificial intelligence (AI), claiming that "we're leading China a lot in AI."

Trump: BRICS threat to dollar like losing a world war

United States President Donald Trump on Tuesday warned that efforts by BRICS nations to undermine the US dollar pose a threat comparable to "losing a major World War."

Speaking at a Cabinet meeting, Trump accused the bloc of trying to strip the dollar of its global reserve status, declaring, "The dollar is king. We're going to keep it that way." The president also warned that under weak leadership, the US could "lose the standard," adding, "We would not be the same country any longer."

Donald Trump calls Elon Musk a ‘train wreck’ as feud escalates over third party

Billionaire’s vow to set up a rival political movement brings formerly close relationship to new low


Elon Musk, left, was until recently a constant presence alongside President Donald Trump © Evan Vucci/AP

Donald Trump has lashed out at Elon Musk after the billionaire unveiled plans to launch a new US political party, calling him a “train wreck” in an escalation of the feud between the US president and his former ally.

Trump and Musk developed a political alliance on the 2024 presidential election, but the pair fell out after the Tesla and SpaceX chief executive’s brief stint as a White House adviser this year.

Musk has harshly criticised Trump’s flagship “one big beautiful bill”, which the president signed into law last week, accusing the administration of “bankrupting” the country because the law is projected to add more than $3tn to the US debt over the next decade.

Over the weekend, Musk announced that he would form a new, third party. He did not offer details or clarify if he intended to stand for office himself, but suggested that the party could focus on a few congressional races, raising questions about whether he could divert votes away from the Republican party in next year’s midterm elections.

Trump lashed out over the announcement late on Sunday, writing on his Truth Social platform that he was “saddened to watch Elon Musk go completely ‘off the rails’ essentially becoming a TRAIN WRECK over the past five weeks”.

“He even wants to start a Third Political Party, despite the fact that they have never succeeded in the United States,” Trump added.

Shares in Tesla were down 7 per cent in pre-market trading on Monday. They have fallen just over 8 per cent in the past month as Musk has repeatedly clashed with Trump.

The president had previously derided Musk’s plan to create a new political party.

“We have a tremendous success with the Republican party. The Democrats have lost their way, but it’s always been a two-party system, and I think starting a third party just adds to confusion,” Trump told reporters.

He added that Musk could “have fun with it, but I think it’s ridiculous”.

Musk declared his intention to form what he called the “America party” on his social media platform X on Saturday, saying it was needed to combat the “one-party system” undermining US democracy so that Americans could have their “freedom” back.

Until recently one of Trump’s closest allies, Musk donated more than $250mn to the president’s election campaign and oversaw the so-called D       epartment of Government Efficiency (Doge) budget-cutting operation, which required him to step back from the daily operations of his companies.

Speaking on CNN on Sunday, Scott Bessent, the US Treasury secretary, suggested that the boards of Musk’s businesses would be displeased by his plans to mount a political party.

“I imagine that those boards of directors did not like this announcement yesterday, and will be encouraging him to focus on his business activities, not his political activities,” the Treasury secretary said. He also took a dig at Musk, saying that the “principles” of Doge had been “popular”, but Musk was “was not”.

Musk later responded by calling Bessent a “Soros stooge”, referring to his past work for Soros Fund Management, the hedge fund founded by investor George Soros, a hate figure among the president’s supporters.

Growing pains and absent leaders hang over Brics summit

Enlarged bloc struggles to find agreements as group reckons with ideological and geographical tensions


As the group has grown from five countries to 11, cracks have opened up between its democratic and autocratic members © Mauro Pimentel/AFP/Getty Images

The Brics bloc of developing nations likes to boast that it represents nearly half the world’s population, but its annual summit this weekend in Brazil will highlight a major drawback of its fast expansion: the difficulty of reaching agreement.

The bloc — comprised until 2023 of Brazil, Russia, India, China and South Africa — has more than doubled in size, as Saudi Arabia, Egypt, Iran and others took its membership from five countries to 11. Some new members have injected fresh divisions into the Brics, which was already struggling for coherence and split between democracies and autocracies.

Around half the group’s leaders plan to skip the Rio de Janeiro summit, including two of the most prominent: Chinese President Xi Jinping and Russia’s Vladimir Putin.

While Putin is busy with the invasion of Ukraine, China has given no explanation for Xi’s absence, throwing a question mark over the event and its ability to make meaningful agreements. His number two, Premier Li Qiang, is set to attend in his stead.

Heightened Middle East tensions mean the leaders of Egypt, Saudi Arabia, the UAE and Iran are not expected to come.


About half of the group’s leaders will not attend the Rio summit, including Chinese President Xi Jinping and Russia’s Vladimir Putin © Maxim Shemetov/Pool/AFP/Getty Images

The Brics acronym was coined by Lord Jim O’Neill, then chief economist at Goldman Sachs, in a 2001 paper about the power of the world’s emerging economies. Brazil, Russia, India and China later moved to create a forum for co-operation, leading to a summit in 2009. South Africa joined in 2011.
Concerns over the bloc’s unwieldy new membership surfaced at a Brics foreign ministers meeting in April. Attendees failed to agree a statement, as tensions flared over who should hold a putative future African UN security council seat.

The first five Brics had previously edged towards suggesting it should go to South Africa. But new members Ethiopia and Egypt disliked that idea.

“You import tensions into Brics by adding these new members,” said Oliver Stuenkel, an associate professor at the School of International Relations at the Fundação Getúlio Vargas think-tank in São Paulo.

Some Brics nations, meanwhile, are pursuing other foreign policy paths. India is bolstering defence and trade ties with western democracies. It has recently agreed trade pacts with the UK and Australia, and is in talks with the EU and the US, the latter in an attempt to fend off President Donald Trump’s threat of a 26 per cent tariff on Indian goods.

India and the US have also stepped up their ties on defence, technology and science in recent years as an anti-China bulwark.

“For India, Brics is the plan B when there are questions about the reliability of partners elsewhere,” said Constantino Xavier, a senior fellow at the Centre for Social and Economic Progress, a think-tank in New Delhi. “The Chinese and particularly the Russians are taking the Brics over, and India knows it has lost influence.”

Host nation Brazil is hoping to steer the gathering towards less controversial areas. These include initiatives on infectious diseases, discussions on artificial intelligence and — with one eye on Brazil’s hosting of the annual UN climate summit in November — funding for green energy.

Mindful of the need to avoid provoking an unpredictable US president, diplomats say the Brics statements are likely to skirt controversial topics that could trigger Washington’s ire. A recent statement by the bloc expressed “grave concern over the military strikes” against Iran, but avoided mentioning the US or Israel.

Before the weekend a sticking point in negotiations over the leaders’ statement was the conflict between Iran and Israel, with Tehran pushing for a harder position, according to a person with knowledge of the matter. Other impasses in the talks related to reform of the UN Security Council and the issue of Palestine, though there was optimism that a consensus would be reached, they added.

At a meeting of the New Development Bank, a multilateral lender founded by the Brics, Brazilian president Luiz Inácio Lula da Silva raised the topic of a “new trade currency”. President Trump has warned the group’s members of steep tariffs if they create an alternative to the US dollar.

Indian Prime Minister Narendra Modi is due to attend the Rio summit but Xi’s absence will hang over the meeting. Keen to downplay the impact, Brazilian diplomats point out that Xi attended Brazil’s G20 summit in Rio less than eight months ago and that Lula met him in Beijing only in May.

But in Beijing, Xi’s non-attendance has sparked speculation over whether his health is up to the long trip or whether he has other undisclosed commitments.

Filling the room instead will be 10 new Brics “partner nations”, a category created last year in part to allay Indian and Brazilian concerns about accepting new members too quickly. They include Belarus, Cuba and Bolivia, as well as Asean nations Vietnam, Thailand and Malaysia.

For China, whose struggling economy is heavily dependent on exports for growth, the main goal will be to win support for the rules-based multilateral trading system in the face of growing US protectionism.

“If the Brics can produce some sort of co-ordinated economic response or statement that would be a very real achievement,” said Zhu Feng, professor of international relations at Nanjing University.

But another Chinese scholar, who did not wish to be named discussing sensitive issues for the Chinese leadership, said the increasingly fractured nature of the Brics made its ability to produce such outcomes less and less likely.

“Rather than working together to beat America,” he said, the Brics members had all “accepted US unilateralism” and were engaged in one-to-one talks with Washington, in some cases, such as Vietnam, at China’s expense.

Pension and housing policy is a war on Britain’s young

Residential property has become a tax-free retirement fund that excludes younger generations


Thanks in part to the tax system, housing has been transformed from a place to live into a de facto tax free retirement fund © Mike Kemp/In Pictures via Getty Images

The writer is the Conservative MP for Tonbridge

For centuries, this country has upheld an unspoken social contract. That each generation will create a better future for the next. That deal is now broken. This is the result of decades of policy choices that have systematically benefited one generation — the baby boomers — initially stimulating the economy but now choking it as wealth is transferred from young to old. Two bad policies in particular have influenced this trajectory. The first was a set of regulatory changes over two decades ago that in effect compelled pension funds to liquidate their investments in domestic UK companies and replace them with government bonds. 

That decision destroyed the core social contract that makes pensions work: the idea that the old profit from the energy of the young. Instead of fuelling living minds and ideas, wealth has been channelled into the dead hand of the state through gilts. Today, over 60 per cent of private sector defined benefit pension assets sit in gilts, with just 1 per cent in UK equities. This has starved British enterprise of long-term domestic capital, driving innovative companies like Arm Holdings and DeepMind to seek foreign investment, siphoning the wealth they create overseas.

Second, and even more detrimental to younger generations, is a set of policies that have artificially created a highly damaging cult of housing. For many decades, too few houses have been built in the UK. Thanks in part to the tax system, housing has been transformed from a place to live and raise a family into a de facto tax free retirement fund that excludes the young. More than 56 per cent of the UK’s total housing wealth is owned by those over 60, while home ownership among those under 35 has collapsed to just 6 per cent. This has had profound social and economic consequences as fewer people marry and have children, further impairing long-term demographic regeneration. The result? More than 80 per cent of the growth in real per capita wealth over the past 30 years has come from appreciation of real estate, not from the financial investment that powers the economy.

Michael Tory, co-founder of Ondra Partners, has argued that this capital misallocation has created a self-reinforcing cycle, weakening our national and economic security. Without productive capital, we are wholly dependent on foreign investment and imported labour, straining housing supply and public services. These distortions can only be corrected through a rebalancing of our national capital allocation that puts long-term national interest above narrow electoral calculation. That means levelling the investment playing field to reduce the taxes on those whose long-term savings and investments in Britain’s future actually employ people and generate growth. Along with building more houses and stricter migration controls, this would bring home ownership into reach for younger generations.

Leaving property as the only lifetime capital gains exemption has distorted UK capital allocation. Private residence relief, which exempts primary residences from taxation and was costed by the Treasury at over £30bn in the 2023-24 tax year, should no longer be sacred. Reconsidering PRR would enable the wholesale rebalancing we need, including a lifetime capital gains exemption on investments in UK companies, eliminating stamp duty on share transactions and raising the UK company-supporting Isa contribution limit. This would incentivise British families to invest in businesses rather than buildings.

Finally, the pension system requires fundamental reform. Channelling more of our nation’s savings back into powering UK companies, technology and entrepreneurs would fuel the industrial renaissance our economy requires and generate better long-term returns for pensioners too. Much of this won’t be popular. The current system serves many vested interests. But if we want the economy to grow we can no longer defend frozen assets; the country’s future is on the line.

In Europe, Economists See a Chance to Rise on the Global Stage

Central bankers who gathered in Portugal this week focused on ways that Europe could improve its competitiveness with the United States and China.


Christine Lagarde, president of the European Central Bank, on Tuesday at the bank’s forum in Sintra, Portugal, which had a sense of calm amid the chaos in the world.Credit...European Central Bank

Among central bankers, the word “uncertainty” is at risk of becoming a cliché, as they run out of ways to convey the heightened volatility they face trying to set interest rates, from trade policies to escalating conflicts in the Middle East. They’ve reached for “exceptional uncertainty” and “unpredictability.”

Despite these worries, the policymakers and other economists who gathered this week in Sintra, Portugal, for the European Central Bank’s annual conference had an air of calm.

It helped that as the main day of the conference got underway on Tuesday, data showed that inflation in the euro area averaged 2 percent in June, matching the central bank’s target. For the three previous years, inflation was firmly above the target and the European Central Bank had engaged in an aggressive campaign to bring it down.

“We are at 2 percent,” Christine Lagarde, the E.C.B. president, said. “I’m not saying mission accomplished, but I say target reached.”

Rather than fret more about inflation, the attendees focused on the steps that the region should take to improve its competitiveness with both the United States and China, like making it easier for people to move jobs and access capital across borders. Many of the ideas have circulated for years, but this time there was hope that European lawmakers would follow through with action.


A supermarket in Paris. Inflation in the euro area averaged 2 percent in June, matching the central bank’s target.Credit...Violette Franchi for The New York Times

Underpinning the discussion was a belief that President Trump’s economic policies have created an opportunity for Europe to bolster its own position in the global economy.

“As Europeans, and particularly in Germany, we are quite good at analyzing issues,” said Joachim Nagel, the president of the Bundesbank, Germany’s central bank. “However, when it comes to implementing solutions, we tend to be quite risk-adverse and thus sluggish in our reaction time.”

But, he added, “I am increasingly getting the impression — also from the discussions here in Sintra — that we are now on the move.“

The confident tone had been established at the outset of the conference on Monday, when the central bank said its monetary policy had held up well in the past few years, despite an unexpected surge in inflation. The bank made only small tweaks to its approach to setting policy and said the 2 percent target would remain. “It’s a strategy for all circumstances,” Ms. Lagarde said.


Construction workers in Barcelona, Spain. European unemployment is historically low, at about 6 percent.Credit...Albert Gea/Reuters

The European Central Bank’s policymakers have increasingly tried to convince colleagues at the European Commission, the executive branch of the European Union, and other lawmaking institutions to make structural changes. Their goal is to strengthen the region’s internal market, so that Europe’s size could be properly used to compete with the United States and China.

Early on, the conference included an exploration into Europe’s labor market by Benjamin Schoefer at University of California, Berkeley. He argued that though European unemployment was historically low at about 6 percent, there was much less productivity growth than in the United States, where wage growth has been slower. That’s because people stayed in their jobs for a long time, partly because pension systems and severance protections discouraged people from switching.

The presentation raised fierce defenses of the European labor market and questions about whether the U.S. labor market was the best aspirational model. But scrutiny of the strengths and weaknesses in Europe and firm recommendations for how the region can close the gap with more productive countries was repeated throughout the week.

The debate over competitiveness continued with the final paper. It exposed how China had become a rival to Europe by specializing in the sectors where the European Union had an advantage, like high-tech areas of machinery and robots. While the United States was decoupling from China, Europe was getting closer despite the technological competition.


A street in Berlin. Workers in Europe stayed in their jobs for a long time.Credit...Patrick Junker for The New York Times

“China is not just catching up to the euro area, it’s actually converging,” said Ana Maria Santacreu, an economist at the Federal Reserve Bank of Saint Louis. “It’s becoming a direct competitor.”

“The path forward is not new,” she added. “Deepening the single market can help Europe use its size to create more output and more innovation.”

For Piero Cipollone, an E.C.B. executive board member, the takeaway was: “Don’t blame others, don’t blame trade for your problems. Put in order your own house.”

These economists can agree on what needs to be done, but they are not wholly responsible for putting them in place nor convincing their citizens or local political parties that they are essential. Between sessions, many participants noted that the recommendations were familiar and that Europe had repeatedly failed to follow through.

Still, the conference ended on a buoyant note about the future, in which the European Union is bigger with strong economic growth. “It’s up to us to do it, we can do it,” Philippe Aghion, a professor at Collège de France and London School of Economics, said in the last session.

“I’m very optimistic,” he added, as the room filled with spontaneous applause.

China criticises Donald Trump’s trade deal with Vietnam

US president’s focus on punishing ‘trans-shipment’ of goods draws Beijing’s ire

(...) China’s commerce ministry on Thursday said it was “conducting an assessment” of the US-Vietnam trade deal, adding: “We firmly oppose any party striking a deal at the expense of China’s interests.”

“If such a situation arises, China will take resolute countermeasures to safeguard its legitimate rights and interests,” the ministry added.

Scores of countries are racing to reach trade deals with the US before the July 9 deadline, when Trump’s suspended “reciprocal” tariffs will come into effect.

Vietnam, one of the world’s most trade dependent countries, had a particularly strong incentive to act quickly to avoid US tariffs. The US buys 30 per cent of its exports.

But the extent of the final tariffs agreed and the additional levy on trans-shipping reflected the heavy price for Hanoi to seal the agreement, analysts said.

“The new US-Vietnam deal is not just about trade; it is clearly aimed at China . . . it is meant to block the flow of Chinese goods that often move through Vietnam to dodge existing US duties,” said Julien Chaisse, an expert on international economic law at the City University of Hong Kong.

“This fits a much wider trend: the US is lining up bilateral deals with countries near China to tighten economic co-operation and, at the same time, [make] it harder for Beijing to stretch its supply chain influence.”

Many south-east Asian nations had prospered during the US-China trade war by offering alternative manufacturing and export hubs for Chinese companies seeking to evade US tariffs. But capitalising on this “China plus one” strategy translated into large trade surpluses in goods with the US.

“The key lesson for other countries from this deal, and that agreed previously by the UK, is that they will be expected to curtail some trade with China,” said Capital Economics’ chief Asia economist Mark Williams and senior Asia economist Gareth Leather in a note.

“That will be seen as a provocation in Beijing, particularly if similar conditions are included in any other deals agreed over coming days.”

Analysts warned that the Vietnam deal, as well as others that Beijing deems as endangering its interests, could also undermine US-China trade talks. Trump recently claimed a tariff truce with Beijing had been signed, but concerns remain over Chinese restrictions on the flow of rare-earth exports and US export controls on advanced technology such as semiconductors.

“This could certainly lead to a renewed escalation of US-China trade tensions if the US insists on very stringent restrictions by third parties on imports from China,” said Frederic Neumann, chief Asia economist at HSBC. (...)