Washington ends ban on Mexican trucks entering the U.S. The ban was ruled to be in violation of NAFTA. A new deal signed between the two countries allows Mexican trucks to deliver goods into the United States and to return goods to Mexico. Previously, Mexican trucks dropped off cargo at the border. For the past 15 years Mexico has applied retaliatory tariffs equaling $2.4 billion of which half were suspended immediately upon the signing and the other half when the first Mexican truck crosses the border in August. The agreement requires all Mexican trucks operating in the United States to comply with U.S. safety standards and mandates the installation of monitoring devices to track truck usage and compliance with service requirements.

IMF lowers U.S. growth forecast. The International Monetary Fund (IMF) predicts U.S. growth for 2011 will be 2.5 percent and 2012 will be 2.7 percent. The IMF also warned that the United States and European Union are "playing with fire" and need to resolve their sovereign debt crises. Failure to do so would create a ripple effect across the global economy and greatly damage the recovery. Emerging markets are expected to grow 4.5 percent in 2012 and are the main drivers for the global recovery. However, the IMF stated emerging markets need more monetary tightening and overheating is becoming increasingly apparent. Overall, global growth is expected to pick up in Q3 and 4.

Global economic slowdown and volatility postponing IPOs.  Macroeconomic financial issues are delaying initial public offerings (IPOs). Concerns over the European sovereign debt crisis, U.S. low growth and China’s slowdown are affecting investor’s interest in new stocks. Over $1 billion in IPOs are casualties due to weak market sentiment. IPOS in Asia Pacific, especially Hong Kong, have been hit hard by the recent slump in markets as the MSCI Asia Pacific stock market index is down 6.1 percent YTD.

China will cut import duties on luxury goods. China is the second largest luxury goods markets and will become No. 1 in 2020. The government places very high tariffs on luxuries, ranging from 50 percent on cosmetics to 30 percent on watches. However, rich Chinese consumers are avoiding the high prices by taking their business to Hong Kong. The tax revamping is part of Beijing’s plan to boost domestic consumption.

WTO rules China is violating international trade law with industrial raw material export controls.  The decision could limit how resource-rich countries reserve raw materials for domestic industries. The complaint was led by the United States, European Union and Mexico. It may take years until China removes the restriction. However, the three countries could apply retaliatory tariffs if China does not comply by year’s end. The ruling will have implications on Beijing’s “rare-earth” export controls.

China shifting investments away from dollar. Estimates from Standard Charter Bank reveal China redirected its investments away from the U.S. dollar and into European government debt more in the first four months of 2011. China’s foreign exchange reserve expanded by approximately $200 billion in Q1 with three-fourths invested in non-U.S. dollar assets. However, there is no sign China is reducing its existing holdings of U.S. dollar assets.

Economic forces in China are increasing U.S. import prices.  The driving forces are higher labor costs in factories, rising transportation costs, and an appreciating yuan.  U.S. import prices, excluding oil, rose 8 percent over the past two years.  Increasing consumption and demand from the Chinese workforce is translating into demand for higher wages. The higher labor costs are pushing up the cost of business in China, thus eroding the cheap labor. Also, the rising generation in China is less willing to work in factories and is demanding well-paying office jobs. Due to the one child policy, the future workforce will be smaller making for less abundant labor. Lastly, Washington’s pressure to have the yuan appreciate makes Chinese imports more expensive.

EU officials agree on single patent regime.  All European Union member countries, except Spain and Italy, have agreed to the new plan.  Under the new plan, firms and individuals will be able to protect intellectual property with a single patent that is legal and valid across all members who sign on. Critics say the new system would be a disadvantage to U.S. companies.

Moody’s places Portugal into junk territory.  The sovereign credit rating was downgraded below investment level on July 5. The decision comes from growing concern Portugal will need a second bail-out and the country will not achieve deficit reduction and debt stabilization.  Should Greece default, which is becoming increasingly likely and evident, then the repercussions will downgrade Portugal’s rating even more.