Speculation Builds Over U.S./China Talks Today as Tariff Rollback Details Hang in Balance

USDA reports today | Azov shipping channel not officially closed, but Ukraine’s drone blitz is shutting it down in practice

Link: Why Farmers Are Fuming at the Drought Monitor — and Why
         the County Line Is Really to Blame
Link: EPA’s Set 3 Slippage: 2028 Biofuel Volumes Likely to Blow Past
         the Statutory Deadline
Link: Value Chain Coalition Warns Against USMCA Produce Restrictions

TOP STORIES
 

— U.S./China tariff talks could determine timing of agricultural relief: Unconfirmed discussions may clarify reciprocal tariff cuts, including possible removal of China’s 10% duties on U.S. farm goods before the critical fall export season.

— Ukraine drone attacks effectively disrupt Sea of Azov shipping: Although Russia has not formally closed the corridor, strikes on vessels are raising freight, insurance and grain-export risks.

— CFTC slows CME’s push toward 24/7 oil trading: Regulators are requiring fuller scrutiny of liquidity, manipulation and price-discovery risks before allowing round-the-clock crude futures.

— Texas screwworm case expands Big Bend outbreak cluster: A Brewster County detection strengthens concerns that New World screwworm is consolidating across a West Texas corridor bordering Mexico.

— Trump delays aircraft tariffs while opening negotiations: The administration will give trading partners 180 days to address aerospace supply-chain concerns before considering Section 232 restrictions.

— USDA poultry-rule rollback divides agriculture: Chicken processors support rescinding Biden-era contracting regulations, while major farm groups warn growers would lose protections against retaliation, opaque payments and unfair practices.
 

FINANCIAL MARKETS

— U.S. stock futures mixed after semiconductor-led rally: Markets pointed modestly higher (Dow) as investors awaited Delta earnings, monitored Treasury yields and assessed continuing U.S./Iran negotiations.

— Major stock indexes advanced Thursday: The Nasdaq rose 1.3%, the S&P 500 gained 0.81% and the Dow added 0.27%.

— Warsh recruits outside experts to modernize the Fed: Five task forces will examine communications, the balance sheet, economic data, productivity and inflation frameworks.

— Consumer credit stalls as card balances decline: May borrowing unexpectedly contracted as households reduced costly revolving debt, raising questions about consumer-spending momentum.

AG MARKETS

— USDA reports new soybean sale to China: Exporters sold 264,000 metric tons of soybeans for delivery during the 2026/27 marketing year.

— Grain futures firm ahead of USDA reports: Wheat led overnight gains on expectations for a historically small U.S. crop, while corn and soybeans posted more modest advances.

— International grain prices rise as French corn deteriorates: Worsening drought damage in France and stronger Chinese livestock prices support European grain values and potential feed demand.

— Wheat takes center stage in July USDA reports: Traders expect sharply reduced wheat production, while watching for demand adjustments to corn and soybean balance sheets.

— Cotton’s Adjusted World Price increases: The AWP rose to 62.86 cents per pound from 60.79 cents the previous week.

— Agricultural futures posted mixed Thursday closes: Wheat and soybean meal advanced, while corn, soybeans, soybean oil, cotton and livestock contracts declined.

EPA REGULATIONS

— EPA proposes easing DEF derates and truck-rule costs: The plan would replace shutdown-style DEF penalties with warnings, reduce warranty burdens and give manufacturers more flexibility meeting 2027 standards.

ENERGY MARKETS & POLICY

— Hormuz uncertainty keeps oil prices supported: Brent headed for a weekly gain near 6% as tanker traffic remained constrained despite negotiations and increased UAE production.

— Oil retreats as demand concerns temper supply fears: Thursday’s decline showed traders are retaining a Hormuz risk premium without yet pricing in a lasting Gulf supply cutoff.

— Natural gas struggles amid LNG maintenance and ample storage: Reduced Freeport LNG demand and a widening inventory surplus are offsetting support from hot-weather electricity consumption.

TRADE POLICY

— Greer ties U.S. trade access to security alignment: The administration is signaling that countries opposing U.S. national-security priorities could face tariffs or broader trade restrictions.

— Countries seek exemptions from forced-labor tariffs: Trading partners argue that legal reforms and cooperation should spare them from proposed Section 301 duties of 10% to 12.5%.

— Wyden favors enforcement over forced-labor tariffs: Sen. Ron Wyden (D-Ore.) says stronger import enforcement and international coordination would be more effective than broad duties.

POLITICS & ELECTIONS

— Cook Political Report shifts governors’ races toward Democrats: Arizona, Ohio, Maine and New Mexico moved in Democrats’ direction, while Oregon became somewhat more competitive for Republicans.

WEATHER

— Storms and flooding continue ahead of northern Plains heat: A slow-moving front will produce severe weather and heavy rain as temperatures intensify across the northern Plains.

— Central U.S. heat dome raises crop-stress risks: Flooding will give way to several days of heat and dryness before thunderstorms may return to parts of the Corn Belt late next week.
 

—Equities today: U.S. equity futures pointed to a mixed open Friday. Attention centers on SK Hynix, whose American depositary receipts begin trading today after the South Korean memory-chip maker raised $26.5 billion at $149 per share — the largest U.S. share sale ever by a foreign issuer — a listing one analyst said lands amid “the most crowded trade in the world right now” in global semiconductors.

Geopolitical pressure eased somewhat, with oil edging back to around $72 per barrel for WTI as talks between the U.S. and Iran on a permanent peace agreement continued despite two days of renewed fighting in the Strait of Hormuz.

The 10-year Treasury yield hovered near 4.54%. No U.S. economic data is scheduled today, leaving the focus on Delta Air Lines’ results, which kick off airline earnings season, and lingering caution that sticky inflation will keep the Fed hawkish even with equities near record highs.

In Asia, Japan +1.2%. Hong Kong +0.6%. China -1%. India +1.1%.
 

In Europe, at midday, London +0.1%. Paris +0.1%. Frankfurt +0.2%.

—Equities yesterday: 

—Warsh enlists outside heavyweights in Fed overhaul push

High-profile economists, former central bankers and business leaders will lead five task forces aimed at reshaping how the Fed communicates, reads the economy, manages its balance sheet and thinks about inflation in an AI-driven era 

Financial Times reports that Fed Chair Kevin Warsh has named prominent outside figures to help “modernize” the Federal Reserve, a move that formalizes the broader institutional review he flagged after his first FOMC meeting. The Fed said the five task forces will cover communications, balance sheet policy, data, productivity and jobs, and inflation frameworks, with external advisers supported by Fed staff but operating independently and reporting findings to the FOMC.

The roster is deliberately high-profile: Mervyn King, Arminio Fraga and Peter Fisher will lead communications; Karen Dynan, Raghuram Rajan and Jeremy Stein will examine the balance sheet; Raj Chetty, former Walmart CEO Doug McMillon and Kevin Murphy will focus on data; Marc Andreessen, Stanford economist Charles Jones and Microsoft’s Asha Sharma will look at productivity and jobs; and Greg Mankiw, Thomas Sargent and William White will revisit inflation frameworks.

The big message: Warsh is not just changing the tone of monetary policy — he is trying to change the machinery behind it. At his June press conference, he said the Fed’s statement would be “shorter” and “simpler,” without forward guidance, and laid out the same five areas as worthy of a “fresh look.” He also singled out the Summary of Economic Projections, the ample-reserves balance sheet regime, real-time data, AI’s labor-market impact and inflation theory as targets for reassessment.

Analysis: This is Warsh’s opening move toward a Fed that relies less on post-2008 crisis-era practices — extensive forward guidance, a very large balance sheet and heavily model-driven communications — and more on outside expertise, real-time data and a clearer framework for productivity-driven growth. The inclusion of Andreessen, Sharma and Jones shows Warsh wants the AI/productivity question inside the Fed’s reaction function, not treated as a side issue. If the task forces validate a stronger productivity outlook, it could give Warsh intellectual cover to argue the economy can run faster with less inflation pressure — and therefore with less need for restrictive rates.

But the task forces are advisory, not a substitute for FOMC consensus. Reuters notes that consequential recommendations would likely need support from Warsh’s colleagues, and the role of governors and regional Fed presidents in the review is still unclear. For markets, the near-term implication is not an immediate rate-policy change but a potentially less predictable Fed: fewer verbal handrails, more weight on incoming data, and possible future changes to balance-sheet policy that could affect Treasury-market liquidity, term premiums and financial conditions.

—Consumer credit stalls as card balances retreat

May’s unexpected decline in borrowing may reflect households paying down costly revolving debt, but a second weak month would raise concern that consumer spending is losing momentum

U.S. consumer credit unexpectedly contracted in May, offering a potential early warning that households are becoming more cautious after two months of strong borrowing. Total outstanding credit declined by $182 million, essentially unchanged but far below economists’ expectations for a $17.5 billion increase. That followed a $20.8 billion expansion in April and left total consumer credit near $5.15 trillion.

The weakness was concentrated in revolving credit, which includes credit cards and other open-ended borrowing. Revolving balances fell by about $5.3 billion, a 4.7% annualized decline and the largest monthly drop since 2024. Nonrevolving credit, including most auto and student loans, increased by roughly $5.1 billion, or a 1.6% annualized rate.

The pullback in card balances is not automatically negative. It may indicate that households used income, tax refunds or savings to pay down debt accumulated during March and April. Revolving credit had risen sharply in the previous two months, so some retracement was reasonable. Consumers also have a strong incentive to reduce balances because credit-card interest rates remain exceptionally high, making revolving debt one of the most expensive forms of household borrowing.

Still, the May decline deserves attention because credit cards often serve as a bridge when wage growth does not keep pace with living costs. A sustained contraction could mean consumers are reaching borrowing limits, lenders are tightening standards or households are voluntarily cutting discretionary purchases. Each possibility would point toward slower consumption, which is particularly important because household spending remains the principal engine of U.S. economic growth.

The broader credit picture is not yet flashing a clear recession signal. New York Federal Reserve data showed that overall household delinquency conditions changed little during the first quarter, while the flow of credit-card balances into early delinquency eased slightly. Commercial-bank credit-card delinquency rates also edged down to 2.92% in the first quarter from 2.94% in late 2025.

The split between revolving and nonrevolving borrowing nevertheless suggests an increasingly selective consumer. Continued growth in auto and education-related credit indicates that households are still willing or required to finance major purchases, while the reduction in card balances may reflect greater restraint on everyday and discretionary spending.

June’s report will therefore carry unusual significance. A rebound in revolving credit would make May look like a temporary correction after unusually strong spring borrowing. Another decline, particularly if accompanied by weaker retail sales or rising delinquencies, would strengthen the case that elevated borrowing costs and affordability pressures are beginning to curb consumer demand. For the Federal Reserve, that would be a mixed development: weaker spending could reduce inflation pressure, but a sharper consumer retrenchment would also increase downside risks to economic growth.

—USDA daily export sale: 264,000 MT soybeans to China for 2026/27. 

—Grains firmer overnight, wheat leads ahead of midday WASDE

Grain and soy futures worked higher in overnight trade, with wheat doing the heavy lifting while corn and the soy complex posted modest followthrough gains ahead of USDA’s July Supply & Demand and Crop Production reports, due at noon ET

•Wheat: Short covering and a shrinking U.S. balance sheet. Winter wheat futures were the clear overnight leaders, with September SRW up 13¼ cents at $6.33 and September HRW surging 15¾ cents to $6.70 — HRW’s premium over Chicago continuing to widen, a telling signal about where the supply concern is concentrated.

The rally has the look of pre-report short covering layered on top of legitimately friendly fundamentals. Traders expect today’s report to peg U.S. all-wheat production near 1.52 billion bu., which would be among the smallest crops in decades. HRW crop condition ratings this season ranked among the worst in more than 30 years, and while winter wheat harvest is now past the halfway mark — normally a seasonal weight on prices — the harvest-pressure window is closing without the usual price damage, emboldening funds holding short positions to trim exposure before USDA speaks.

The counterweight remains the Black Sea. Russia’s harvest is tracking toward roughly 90 MMT with early yields running ahead of last year, and SovEcon this week nudged its Russian export forecast up 200,000 MT to 46.5 MMT on bigger carry-in stocks. That keeps a lid on how far a U.S. supply-driven rally can run — world buyers remain well supplied — but for today, the domestic story has the microphone. HRW outpacing SRW by 2½ cents overnight underscores that this is a U.S. production story, not a global demand story.

• Corn: Quiet consolidation before the numbers. September corn firmed 1¾ cents to $4.33¼ in subdued positioning trade. Expectations for today’s WASDE lean neutral-to-mildly friendly: analysts generally look for USDA to hold the 2026 yield projection steady around 183 bu. per acre — changes rarely come this early absent obvious crop deterioration — with the more likely action on the demand side, where stronger feed and residual use could shave ending stocks modestly.

The bigger swing factor is still weather. Extended forecasts flag above-normal temperatures and below-normal precipitation across the Midwest through late July — squarely atop pollination for much of the crop, with silking underway. The near-term maps are less threatening (cooler temperatures and scattered showers this week), which is capping upside enthusiasm for now. Externally, Europe’s heat-stressed corn crop keeps getting smaller (EU production estimates were trimmed to 53.7 MMT from 54.9 MMT), a modest plus for U.S. export prospects — though threatened U.S. trade restrictions involving Spain inject uncertainty into a market that may need to import an estimated 150 million bu. of corn this year amid drought. Weekly ethanol production slipping to 1.093 million bpd is a mild demand-side negative to watch.

• Soybeans: China demand real, but rally needs fresh fuel. The soy complex posted fractional gains, pausing after a demand-driven run that lifted beans to multi-week highs. The story here is China: USDA confirmed a 472,000-MT flash sale (136,000 MT old-crop, 336,000 MT new-crop) — the largest daily soybean sale in months — with reports of another five cargoes booked as Beijing works toward its stated 25 MMT annual purchase commitment. The confirmed business validated last week’s rumor-driven strength, but as analysts have cautioned, the market now needs a steady cadence of follow-on purchases to sustain the move rather than one-off headlines.

Product markets remain the complex’s backbone. August soyoil added 40 points to 70.32 cents, extending a rally powered by energy-market strength and diesel-driven vegoil demand that has pushed board crush margins sharply wider. Meal continues to lag, up just 30 cents overnight at $317.70 — the oil-share trade remains firmly in control, and meal’s heaviness is capping what beans can do on their own.

Bottom line: Today belongs to USDA. July WASDEs rarely deliver supply-side fireworks — acreage was just updated June 30 and yield changes typically wait for August’s survey-based estimates — so the market’s attention will be on demand-line adjustments: feed use in corn, the wheat production print, and whether USDA’s export projections start reflecting China’s renewed soybean buying. With funds still carrying sizable short positions in wheat and corn, a friendly surprise carries asymmetric upside risk. Absent one, expect weather — specifically, whether the hot-and-dry late-July pattern verifies over pollinating corn — to reclaim the driver’s seat by Monday.

—International grain prices firm as French corn woes deepen

Paris wheat edges higher and China’s hog rally signals stronger feed demand, while another drop in France’s corn ratings keeps a weather premium under European row crops

International grain markets carried a modestly firmer tone Friday, July 10, with the standout fundamental development coming out of France, where the government again lowered its corn crop condition rating. The downgrade extends a rapid deterioration driven by persistent drought and a third heatwave — FranceAgriMer’s good/excellent score had already tumbled from 84% to 76% to 58% in recent weeks, a 13-year low and well below the 78% posted a year ago, with analysts warning that non-irrigated fields could face abandonment if rains don’t arrive soon. Friday’s further slippage confirms the crop is still losing yield potential, and it explains why Paris corn is holding its ground at elevated levels rather than following U.S. futures’ seasonal pattern.

Paris milling wheat rose €0.75 to €205.75 per metric ton, equal to about $234.65 per ton or $6.39 per bushel, a gain of roughly 2 cents in U.S. terms. Paris corn was unchanged at €233 per ton, or $6.75 per bushel — leaving European corn priced at a premium to milling wheat, an unusual inversion that underscores how tight the EU coarse-grain balance sheet is becoming as the French crop shrinks. That relationship encourages wheat feeding in Europe and, at the margin, widens the window for corn imports from the U.S., Brazil and Ukraine.

The Chinese numbers lean supportive as well. Dalian corn gained the equivalent of 4 cents to $8.64 per bushel — about $340 per metric ton, a massive premium to world values that keeps import economics wide open whenever Beijing allows the trade. Dalian soybean meal was flat at $447 per metric ton, equivalent to roughly $406 per short ton in U.S. terms, still far above U.S. meal values. The most notable Chinese signal is in livestock: spot Dalian hog futures have rallied 15% over the past 10 days to the equivalent of $0.76 per pound ($76 per hundredweight). A hog rally of that speed points to a tightening Chinese pork supply and improving feeding margins, which historically translates into firmer Chinese demand for corn, sorghum and protein meal in the months ahead.

The one soft spot overnight was vegetable oil, where Malaysian palm oil slipped $5 per metric ton, a decline of less than a quarter-cent per pound — more consolidation than trend change, though it offers no help to soybean oil. On balance, the day’s international signals tilt friendly for U.S. exporters: a shrinking French corn crop, European corn priced above wheat, Chinese domestic grain values far above world levels and a hog market flashing renewed feed demand.

—Wheat takes center stage as USDA Delivers Noon ET reports

Traders brace for a historically small wheat crop while watching for old-crop corn export bumps and only cosmetic changes to new-crop corn and soybean balance sheets

Today’s noon ET release of USDA’s July Crop Production and WASDE reports arrives with the trade positioned for stability in row crops and drama in wheat. The July update is typically a bookkeeping exercise — new-crop corn and soybean yields stay on trendline until the August survey — but this year’s version carries more intrigue than usual, coming just days after USDA’s Acreage report delivered record-low wheat plantings and with European heat raising questions about world supplies.

Wheat is the report’s marquee event. The July Crop Production report brings the first survey-based look at the full 2026 wheat crop, and traders expect all-wheat output near 1.524 billion bushels — which would be the smallest U.S. crop since 1970. The number reflects record-low harvested acreage of just 32.06 million acres and hard red winter conditions that have run among the worst in more than 30 years, with the gulf between winter wheat planted (31.52 million acres) and harvested (21.21 million) area underscoring heavy abandonment. On the balance sheet side, 2026-27 wheat ending stocks could slip below 700 million bushels for the first time since 2023-24. Any production figure meaningfully under trade expectations would amplify what has already been the market’s most supportive supply story, particularly with extreme heat threatening to trim European output at the same time. Note: This is USDA’s first stab at wheat-by-class estimates.

For corn, attention splits between old-crop demand and new-crop carryover math. Analysts peg 2025-26 ending stocks near 2.077 billion bushels, with room for a bullish export revision given commitments running roughly 25% ahead of year-ago levels. On new crop, USDA is expected to hold the yield at 183 bushels per acre — the agency rarely moves off trend in July unless conditions are deteriorating sharply, and recent Midwest rains argue against it — putting production near 16 billion bushels. The key is the pass-through: a smaller old-crop carryout mechanically tightens new-crop beginning stocks, and traders see 2026-27 ending stocks falling below 1.9 billion bushels. Feed usage is another line to watch, with some analysts expecting it higher than previously forecast.

Soybeans look like the quietest corner of the report, though the estimate ranges suggest otherwise. The Dow Jones survey puts 2025-26 ending stocks around 337 million bushels, with the new crop yield steady at 53 bushels per acre and production near 4.473 billion bushels. New-crop carryout is seen near 340 million bushels, but the spread of estimates — roughly 270 million to 358 million — is wide enough that a print at either edge would move the market. Hovering over the soybean balance sheet is the demand question: talk of Chinese buying interest has circulated all week, but confirmed new-crop purchases remain thin (about 136,000 metric tons in announced sales), so any USDA adjustment to the export line will be read as a signal of the agency’s confidence in that business materializing.

On the world stage, traders will focus on whether USDA nudges Brazilian and Argentine corn production higher — modest upward revisions are anticipated — and how aggressively it addresses European drought and heat damage to wheat and coarse grains. Global reserves are expected to contract across the major commodities, a backdrop that magnifies the importance of every U.S. weather development from here.

The market context matters, too. Grains rallied following the June 30 Acreage and Grain Stocks surprises, then gave ground to profit-taking this week as Midwest forecasts turned cooler and wetter. That leaves positioning relatively clean heading into the noon numbers. The consensus view is that this WASDE shows stability rather than upheaval, with the real price catalyst remaining July weather through corn pollination and into the soybean crop’s critical August window. But with wheat supplies at generational lows, world stocks shrinking and a wide range of soybean carryout guesses, the report has more capacity to surprise than a typical July release. As always, it is the gap between the print and the expectation — not the number itself — that will set the tone for the afternoon session.

Pre-Report Guesstimates: 2026/27 US Ending Stocks (million bushels)

*Cotton in millions of bales.
 

Pre-Report Guesstimates: 2025/26 US Ending Stocks (million bushels)

Pre-Report Guesstimates: 2026/27 US Yield and Production (BPA and million bushels)

*Cotton production in millions of bales.

Pre-Report Guesstimates: Wheat Production (million bushels)

—Cotton AWP rises. The Adjusted World Price (AWP) for cotton is at 62.86 cents per pound, effective today (July 10), up from 60.79 cents the prior week. This marks the eighth straight week the AWP has been at

—Agriculture markets yesterday:

—EPA targets DEF derates and 2027 truck-rule costs

Proposal would ease warranty and useful-life mandates, allow temporary noncompliance penalties, and replace DEF-triggered shutdowns with warnings — but environmental groups are likely to challenge the public-health tradeoff 

EPA’s proposal is best read as a targeted rollback of the compliance machinery around the 2023 heavy-duty engine rule, not a full repeal of the underlying NOx standard. The agency says it would revise model year 2027-and-later heavy-duty highway engine provisions by reducing emissions warranty obligations, delaying longer regulatory useful-life requirements, and allowing nonconformance penalties for certain medium- and heavy-heavy-duty diesel engines that cannot meet the new standards on time. EPA also proposes to amend SCR/DEF “inducement” rules so new trucks, tractors and other nonroad diesel equipment would no longer face DEF-related derates or speed restrictions; instead, operators would receive visible and/or audible warnings and be allowed to keep operating until they can safely fix the problem.

The biggest real-world impact for farmers, independent truckers and rural operators is the DEF deratement change. Since 2010, most on-road diesel trucks and many nonroad machines have used DEF in selective catalytic reduction systems to cut NOx, but EPA acknowledges those systems can force major speed loss or make equipment nearly inoperable when DEF runs out or sensors fail. EPA’s current proposal would remove that shutdown-style enforcement mechanism for newly manufactured highway and nonroad equipment and seeks comment on whether guidance should allow similar changes for in-use equipment.

For truck manufacturers and fleets, the proposal is aimed at reducing the cost and risk of the 2027 transition. EPA says the rule could save up to $12 billion overall and as much as $6,000 per new truck, largely by maintaining model year 2026 warranty periods for model year 2027-and-later engines rather than moving immediately to the longer warranty structure adopted in the 2023 rule. EPA’s own fact sheet says the proposal would also delay longer useful-life requirements until model year 2030 and make nonconformance penalties available for certain engines beginning in model year 2027, giving manufacturers more time while still allowing sales to continue.

The political framing is clear: the Trump EPA is trying to make diesel reliability and “right to repair” part of its broader cost-of-living and deregulation message. That matters for agriculture because derates are not just a trucking nuisance; they can strand combines, tractors, grain haulers and refrigerated freight during narrow operating windows. The proposal builds on earlier EPA actions, including August 2025 DEF software guidance, a February 2026 information demand to 14 manufacturers covering more than 80% of DEF-system products, and March 2026 guidance allowing manufacturers to move away from urea quality sensors toward NOx sensors to reduce false DEF failures.

The environmental and legal vulnerability is that EPA is loosening the backstop mechanisms that were designed to make sure emissions controls work over a vehicle’s life. The Biden EPA said the 2023 rule was more than 80% stronger than prior standards and projected major health benefits from lower smog- and soot-forming pollution, including fewer premature deaths, hospital visits, asthma symptoms and missed work and school days. EPA now argues its proposal would still retain nearly 90% of the originally projected NOx reductions, but critics will focus on whether shorter warranties, delayed useful-life requirements and temporary nonconforming engines weaken real-world compliance, especially in communities near freight corridors.

The most important market implication is that EPA is trying to head off a 2027 truck availability and cost shock. Allowing nonconformance penalties could prevent a hard stop in engine sales if some manufacturers are not ready, while lower warranty exposure may reduce upfront truck prices and ease concerns about a pre-buy surge. But the tradeoff is that some engines may enter the market without fully meeting the new standard on day one, and the effectiveness of the alert-only DEF system will depend on whether operators actually repair failures promptly once the threat of derating is gone.

This is still only a proposal.Comments are due Aug. 29, 2026, with virtual public hearings scheduled July 29 and July 30 and a possible extra session July 31 if needed. That schedule makes the final rule timing important for manufacturers already planning model year 2027 production, and it gives environmental groups, engine makers, trucking groups, farm organizations and states a short but meaningful window to build the record for what is likely to be a legally contested final rule.

Of note: One contact said, “Who is going to buy all the semis that are sitting on lots with the DEF system?”

—Friday: Hormuz uncertainty keeps a firm floor under oil prices

Brent is gaining nearly 6% this week as renewed U.S./Iran fighting slows tanker traffic, while diplomacy and rising Gulf output prevent the market from pricing in a prolonged shutdown

Brent crude held above $76 per barrel Friday and was headed for a weekly gain of roughly 6%, reflecting the return of a sizable geopolitical risk premium after renewed U.S./Iran strikes disrupted the gradual normalization of shipping through the Strait of Hormuz. Prices eased slightly during Friday trading, but the weekly advance underscores that traders remain unwilling to assume the latest military exchange will be contained or that tanker movements will quickly return to prewar levels. WTI crude oil is near $73. 

The immediate market issue is not whether Hormuz is completely closed, but whether shipowners, insurers and energy companies view the route as sufficiently safe and predictable to restore normal traffic. The strait ordinarily carries about one-fifth of global oil and gas supplies, meaning even a partial and intermittent disruption can tighten prompt supplies, raise freight and insurance costs and force refiners to compete more aggressively for barrels available outside the Persian Gulf. Vessel traffic has recovered from the extremely depressed levels seen earlier in the conflict, but flows remain well below normal and are vulnerable to every new military exchange.

The conflict has already produced an extraordinary inventory shock. The International Energy Agency estimated in June that cumulative Middle Eastern supply losses had exceeded 1.3 billion barrels after Hormuz flows fell from roughly 20 million barrels per day before the conflict to an average of only 2.7 million barrels per day during March, April and May. That depletion matters because the market’s buffer against another disruption is now much thinner than it was at the beginning of the crisis.

The IEA’s latest warning is therefore less about an immediate shortage than about the difficulty of rebuilding inventories later this year. Global supply recovered during June as some Hormuz traffic resumed, but renewed fighting threatens to delay that improvement and could undermine projections for a larger supply rebound in 2027. The agency’s June outlook anticipated global oil supply falling sharply during 2026 before recovering next year, but it stressed that demining, transit arrangements and unresolved political risks could constrain that recovery.

Diplomacy is preventing the market from moving substantially higher. Technical negotiations between Washington and Tehran reportedly remain underway, and prices have repeatedly retreated whenever traders see a plausible route toward another ceasefire or a broader security agreement. That pattern suggests the market is assigning meaningful probability to an eventual settlement rather than pricing in a permanent loss of Gulf exports. It also explains why Brent remains in the mid-$70s instead of returning to the much higher levels reached during the worst phase of the disruption.

The United Arab Emirates is providing another important counterweight. UAE crude production rose above 3.8 million barrels per day in June, while crude exports reached record levels as Abu Dhabi brought additional capacity into operation. Gulf exports increased sharply from May and exceeded 10 million barrels per day, although they were still about 40% below prewar levels. The UAE’s response demonstrates that producers with spare capacity are attempting to replace disrupted barrels, but higher production cannot fully solve the problem when the principal constraint is the ability to move oil safely through the region.

For the oil market, the central tension remains between physical recovery and geopolitical fragility. Additional UAE production, recovering Gulf output and continued negotiations argue against a sustained price spike. However, depleted commercial and strategic inventories, reduced tanker traffic and the possibility of further attacks make it difficult for Brent to fall decisively while the conflict remains unresolved.

The likely near-term result is continued volatility around a firm underlying price floor. A verified ceasefire accompanied by a sustained rebound in tanker movements could remove several dollars of risk premium relatively quickly. Conversely, attacks on energy infrastructure, tankers or loading terminals could push Brent sharply higher because the market has fewer inventories available to absorb another major supply interruption. For now, oil prices are being set less by headline production capacity than by confidence that Gulf barrels can reach international buyers without interruption.

—Thursday: Oil pulls back as demand worries temper Middle East risk premium

Crude’s Thursday decline suggests traders are still pricing in Hormuz uncertainty, but not yet a sustained supply shock, while inflation and growth concerns are again weighing on demand expectations

Oil prices retreated Thursday, giving back part of Wednesday’s sharp gains as demand-side concerns overtook immediate fears of a broader Middle East supply disruption. Brent crude settled at $76.30 per barrel, down $1.72, or 2.2%, while WTI fell $1.44, or 2%, to $72.08. The move signals that while the U.S./Iran conflict and reduced Strait of Hormuz shipping activity remain major market risks, traders are not yet treating the disruption as a lasting cutoff of Persian Gulf crude flows.

Key issue remains whether the current slowdown in shipping through Hormuz proves temporary or becomes a more durable constraint on Middle Eastern exports. Before the conflict, roughly one-fifth of global oil and LNG shipments moved through the waterway, so even partial disruption keeps a geopolitical premium in crude. But recent indications that flows have improved from earlier lows, even if still below pre-conflict levels, helped cool the panic buying seen earlier in the week.

The broader macro backdrop also worked against crude. Inflation concerns, uncertainty over monetary policy and signs of softer demand growth in major economies all point to slower future oil consumption if higher interest rates and weaker activity persist. That makes crude especially sensitive to whether the Middle East risk premium is matched by actual lost barrels.

Refined product markets remain a separate source of volatility. Russia’s diesel export restrictions, imposed after continued attacks on energy infrastructure, add another layer of uncertainty to global fuel supplies. Even with crude easing, diesel and distillate markets could stay firm if disruptions in Russia and the Middle East overlap, keeping pressure on transportation, freight and farm fuel costs.

—Natural gas struggles as LNG maintenance adds to supply pressure

Summer heat is supporting power-sector demand, but reduced Freeport LNG consumption and a growing storage surplus are limiting the market’s ability to rally

U.S. natural gas prices stabilized near $3 per million British thermal units Friday after tumbling 6.2% in the previous session to $3.012, the lowest settlement in roughly six weeks. The selloff reflected a bearish combination of a larger-than-expected storage injection and planned maintenance at Freeport LNG, which will temporarily remove an important source of demand from an already well-supplied domestic market.

Freeport LNG’s maintenance program, beginning July 10 and extending into late August, is expected to reduce gas consumption at the Texas export facility’s pretreatment and liquefaction units. Because Freeport can normally consume more than 2 billion cubic feet per day when operating near capacity, even a partial reduction in feedgas demand can leave substantial additional volumes available to the domestic market. That effect is particularly important during the summer injection season, when LNG exports are needed to absorb record or near-record U.S. production.

The latest storage report reinforced concerns that supply is exceeding weather-driven demand. The Energy Information Administration said working gas inventories rose by 61 billion cubic feet during the week ended July 3, lifting total stocks to 2.983 trillion cubic feet. Inventories were 185 Bcf above the five-year average, up from a 175-Bcf surplus the previous week, although stocks remained 15 Bcf below year-earlier levels and within the normal five-year range.

The widening surplus is more bearish than the headline inventory level alone suggests. The 61-Bcf build exceeded the five-year average injection of roughly 51 Bcf for the comparable week despite hot summer conditions. Strong wind generation reportedly displaced some gas-fired electricity production, allowing more supply to move into storage than traders had anticipated.

Weather remains the market’s principal source of support. Forecasts calling for above-normal temperatures through July 23 should keep air-conditioning demand elevated and require heavy use of gas-fired power plants. Gas already supplies a large share of U.S. electricity generation, making sustained heat capable of rapidly tightening daily balances. The supportive effect will be strongest if high temperatures expand beyond the central United States into the densely populated East, where cooling demand is greater.

Production is also showing modest signs of easing. Lower 48 output has averaged about 109.7 billion cubic feet per day so far in July, down from 110.0 Bcf per day in June and below the record monthly average of 110.6 Bcf per day reached in December 2025. The decline is not yet large enough to create a genuinely tight market, but it could become more consequential if heat persists, LNG demand recovers after maintenance or producers respond to weaker prices by reducing drilling and completion activity.

The near-term price outlook therefore remains caught between strong cooling demand and abundant supply. Maintenance at Freeport LNG is likely to place a ceiling on rallies through much of the summer by redirecting export-bound gas into storage. Persistent heat could keep prices from falling substantially below $3, but a sustained recovery probably requires smaller weekly storage builds, a sharper production decline or an earlier-than-expected restoration of LNG feedgas demand. Until one of those changes emerges, the market is likely to remain highly sensitive to daily weather-model revisions, with heat-driven advances vulnerable to renewed selling whenever storage data confirm that supplies remain comfortable.

—Greer signals trade access will be tied to security alignment

Trump’s Spain threat may have been brief, but USTR says it reflects a broader doctrine: countries that reject U.S. security priorities should not assume normal access to the U.S. market 

U.S. Trade Representative Jamieson Greer used President Donald Trump’s short-lived threat to halt trade with Spain to make a larger point: under this administration, trade policy is no longer being treated as separate from national security alignment. Greer said the U.S. cannot allow countries to “spurn” Washington on security matters while continuing to enjoy normal commercial access to the American market, framing Spain’s NATO dispute as a warning to other partners.

Trump’s comments at the NATO summit in Ankara were unusually blunt, calling Spain a “terrible partner” and saying he wanted trade with the country cut off. But the threat was quickly softened after what Trump described as Spain honoring a request for “lots of payments,” and Greer said the president had found a “path forward” after meeting with Spanish Prime Minister Pedro Sánchez. That suggests the Spain episode may have been resolved tactically, but Greer’s remarks indicate it was not viewed inside the administration as merely rhetorical.

The broader message is that market access is becoming another tool of geopolitical discipline. Greer said countries seeking a constructive trading relationship with the U.S. must also be aligned on “economic security and other things,” and warned the administration has prepared options for countries that reject national-security alignment with Trump. That language extends the logic of tariffs beyond trade deficits, unfair practices or forced labor and into a more open linkage between security cooperation and commercial treatment.

The legal hook Greer emphasized is significant. He said Trump could use the International Emergency Economic Powers Act to impose country-specific trade bans, even after the Supreme Court struck down the administration’s earlier IEEPA-based tariffs. Greer argued the court rejected IEEPA as a tariff authority but left intact its use to prohibit trade, pointing to existing restrictions on countries such as North Korea. That distinction matters because it gives the administration a potential path to escalate from tariffs to broader trade prohibitions against selected countries, though such a move against a NATO ally or major trading partner would almost certainly trigger legal, diplomatic and market blowback.

Greer also tried to separate the administration’s post-IEEPA tariff architecture from a simple replacement strategy, even as the policy direction remains clear. Trump has already used Section 122 of the Trade Act of 1974 to impose temporary 10% duties tied to balance-of-payments concerns, while USTR is pursuing Section 301 tariffs against 60 major trading partners based on forced-labor findings. Another Section 301 probe on structural excess capacity is moving separately. Greer said he does not view these as one-for-one replacements for the overturned IEEPA tariffs, but as independent tracks aimed at the same underlying problem: what the administration sees as unfairness, lack of reciprocity and global trade distortions that have harmed U.S. workers.

The timing is important because the Section 122 tariffs are set to expire July 24, while Greer acknowledged the Section 301 forced-labor duties may not be ready by then, though he said they would come “relatively soon.” That creates a possible gap in the administration’s tariff framework and increases the importance of USTR’s pending investigations as the vehicle for keeping pressure on trading partners.

The policy signal for agriculture and other export sectors is mixed. On one hand, the administration is making clear it will use every available authority to maintain leverage over trading partners. On the other hand, threats to cut off trade with countries such as Spain, even if quickly walked back, inject uncertainty into markets that depend on predictable access and stable alliances. Spain itself is not among the largest U.S. farm export destinations, but the precedent is bigger than Spain: if security disputes can become trade disputes overnight, U.S. exporters face a wider field of retaliation risk and commercial disruption.

The core takeaway is that Greer is codifying Trump’s approach: trade privileges are conditional, legal authorities will be layered, and the administration intends to preserve its tariff-and-pressure strategy “by hook or by crook.” The Spain episode may have ended quickly, but it served as a public demonstration of how the White House may treat allies and trading partners that fall out of line on security priorities.

—Forced-labor tariffs face pushback as countries seek exemptions

Trading partners argue reforms are underway, raising questions over whether USTR will use tariffs as leverage or reward demonstrated progress 

More than a dozen governments used this week’s U.S. Trade Representative (USTR) hearing to argue they should be exempt from proposed Section 301 tariffs tied to forced-labor enforcement, signaling that the administration’s initiative is becoming as much a diplomatic negotiation as a trade enforcement action. The proposed duties — generally between 10% and 12.5% — could ultimately apply to roughly 60 economies that USTR concluded either lack adequate bans on imports produced with forced labor or fail to enforce existing laws.

Several countries emphasized that they have already adopted, or are in the process of adopting, legislation prohibiting imports made with forced labor. Mexico mounted one of the strongest defenses, arguing that it has fully implemented its USMCA obligations, established cooperation with U.S. Customs and Border Protection, and should not face tariffs absent evidence that forced-labor goods are entering the United States through Mexico. Mexican officials warned that imposing tariffs despite those efforts would discourage cooperation rather than encourage stronger enforcement.

That argument highlights a central policy question confronting USTR: whether the Section 301 investigation is intended primarily to punish current shortcomings or to accelerate reforms abroad. Countries including Guatemala, Ecuador, Sri Lanka, Peru, Honduras, Kazakhstan, Vietnam, South Korea and Malaysia all pointed to new laws, pending legislation or ongoing negotiations with Washington as evidence that they are moving toward stronger compliance. Malaysia argued that tariffs would even conflict with a bilateral trade agreement that gives it a two-year period to implement its forced-labor import ban.

The timing is especially significant because the investigation could become a vehicle for replacing tariffs imposed under the International Emergency Economic Powers Act after the Supreme Court curtailed the administration’s use of that authority. If new Section 301 tariffs take effect as temporary IEEPA duties expire later this month, they would provide the administration with a more durable legal framework for maintaining trade pressure while avoiding the legal vulnerabilities associated with the emergency powers statute.

Several governments also challenged USTR’s legal rationale. India argued the agency has not satisfied Section 301’s statutory requirements and questioned why certain products linked to forced labor or specific textile imports would receive exemptions, suggesting the proposal reflects commercial considerations as much as labor policy.

For agricultural trade, Mexico’s case is particularly important because USMCA-compliant goods would remain exempt under the proposal. That carveout limits the immediate impact on most North American farm trade, but the broader investigation could reshape sourcing decisions and supply-chain compliance requirements for exporters worldwide.

The final outcome will indicate whether the administration intends to use forced-labor tariffs primarily as a negotiating tool to drive policy changes or as a long-term enforcement mechanism that permanently alters market access.

—Wyden urges stronger forced-labor enforcement over new tariffs

Finance Committee Democrat argues Trump administration should expand enforcement and international cooperation rather than impose broad Section 301 duties 

Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) is urging U.S. Trade Representative Jamieson Greer to abandon proposed Section 301 tariffs on roughly 60 trading partners over forced labor concerns, arguing the administration should instead strengthen enforcement of existing U.S. laws and expand international cooperation to combat forced labor. In a July 9 letter, Wyden contends the proposed 10% to 12.5% tariffs are less about addressing forced labor than reconstructing President Trump’s broader tariff strategy after the Supreme Court invalidated key country-specific tariffs imposed under the International Emergency Economic Powers Act (IEEPA).

Wyden argues the proposed tariff structure is poorly designed because it applies nearly uniform duties to countries with widely differing records on forced labor, treating close U.S. partners similarly to more serious offenders. He maintains such blanket tariffs are unlikely to encourage governments to improve labor standards while increasing costs for U.S. businesses and consumers.

The Oregon Democrat also criticizes the administration’s own enforcement record under the Uyghur Forced Labor Prevention Act (UFLPA), noting that no new companies have been added to the UFLPA Entity List since January 2025. He points to a sharp decline in the value of imports detained under the law—from roughly $1.76 billion in 2024 to about $166 million in 2025—as evidence that enforcement has weakened. Wyden further faults the administration for reducing Labor Department international forced-labor programs and withholding congressionally appropriated funding for the International Labor Organization, arguing those actions diminish U.S. leadership and create opportunities for China to expand its influence.

Instead of new tariffs, Wyden proposes a strategy centered on rigorous enforcement of existing U.S. import bans, expanded information sharing with trading partners, coordinated risk assessments, technical assistance to help countries strengthen their own import prohibitions, and greater transparency and anti-circumvention measures. He argues that building an international enforcement network would be more effective than imposing across-the-board tariffs that could strain relations with allies while doing little to eliminate forced labor from global supply chains.

The letter highlights the growing political divide over the administration’s forced-labor initiative. USTR maintains the proposed Section 301 action addresses long-standing trade distortions tied to forced labor and says final tariff decisions are expected soon. Wyden, however, joins other Democratic critics in arguing that stronger enforcement—not broader tariffs—is the more credible path to protecting workers while preserving cooperation with key trading partners.

—Cook Political Report shifts five governors’ races, boosting Democrats’ outlook

Rating changes reflect stronger Democratic opportunities in key states, while Republicans face a more challenging map amid an unfavorable national environment 

The nonpartisan Cook Political Report has shifted its ratings in five gubernatorial contests, with four moves benefiting Democrats and only one favoring Republicans, signaling a more favorable political landscape for Democrats heading into the 2026 elections. If those trends hold, Democrats could emerge with more governorships than Republicans for the first time since 2010, despite defending several competitive seats.

The most significant changes came in Arizona and Ohio. Arizona moved from Toss Up to Lean Democrat, where Gov. Katie Hobbs has built a commanding fundraising advantage and begun advertising early against expected Republican nominee Rep. Andy Biggs (R-Ariz.), whose conservative profile and close ties to the MAGA movement could prove a liability in a statewide election. Cook notes Hobbs also benefits from relatively solid approval ratings and Arizona’s long history of reelecting incumbent governors.

Ohio shifted from Lean Republican to Toss Up, reflecting growing concerns among Republicans about businessman Vivek Ramaswamy’s electability despite his substantial personal spending. Democrat Amy Acton, the state’s former health director, has remained competitive in polling and has posted impressive fundraising numbers. Cook argues that Ramaswamy’s heavy advertising has yet to improve his standing, while Acton appears to be attracting independents and even a small share of Republican voters.

Cook also removed two Democratic-held states from the competitive map. Maine moved from Likely Democrat to Solid Democrat after polling showed former state House Speaker Hannah Pingree opening a double-digit lead over former Assistant Secretary of State Bobby Charles. Likewise, New Mexico shifted from Likely Democrat to Solid Democrat, with former Interior Secretary Deb Haaland holding an overwhelming fundraising advantage and Republicans showing little sign of making the race a national priority.

The lone shift benefiting Republicans came in Oregon, which moved from Solid Democrat to Likely Democrat. Gov. Tina Kotek continues to face weak approval ratings and renewed criticism over crime and homelessness, creating a more competitive environment as Republican Christine Drazan seeks a rematch after narrowly losing in 2022. Even so, Cook believes Oregon’s Democratic lean and national political climate still favor Kotek.

Overall, Cook concludes that Republicans face a narrower path to expanding their gubernatorial ranks. While the party remains competitive in several states, President Donald Trump’s political headwinds are complicating GOP campaigns, particularly in suburban and swing-state electorates. Democrats, meanwhile, are benefiting from stronger recruiting, fundraising, and a more favorable national environment, although they still must defend difficult open-seat races in battlegrounds such as Michigan and Wisconsin while pursuing pickup opportunities in Georgia and Iowa.

— NWS outlook: Rounds of strong to severe thunderstorms and heavy rainfall continue from the central Plains eastward to the east-central U.S. near a slow-moving front… …Heat is forecast to intensify over the Northern Plains to start the weekend, while clouds and precipitation will keep daytime temperatures cooler than normal from the central Plains to the Mid-Atlantic.

—Heat dome to clamp down on central U.S. before storms return

Flooding threatens the southeastern Corn Belt, while a week of heat and dryness raises crop stress risks farther west before thunderstorms potentially re-emerge late next week

Heavy rainfall is creating sharply contrasting crop/weather conditions across the central United States. Precipitation approaching four inches near Cape Girardeau, Missouri, has prompted widespread flood and flash-flood warnings across southeastern Missouri, southern Illinois and western Kentucky. The excessive moisture could cause localized crop flooding, erosion and fieldwork delays across the southeastern Corn Belt. Farther west, rainfall exceeding one inch across northwestern Kansas and western Nebraska has provided an unexpected and timely boost to soil moisture in parts of the central and southern Plains.

The heavy rain threat will continue across the southeastern Corn Belt through Saturday morning before an unusually strong upper-level ridge takes control of the central United States. The high-pressure dome, forecast to reach roughly 600 decameters, will center over eastern South Dakota and southwestern Minnesota and produce nearly complete dryness across the Corn Belt and hard red winter wheat region from Sunday through at least July 16.

The most extreme heat will focus on the northern Plains, where temperatures are expected to exceed 100 degrees from Saturday through Wednesday. The main Corn Belt should experience widespread highs of 88 to 94 degrees. Although those temperatures are not unprecedented for July, the combination of sustained heat, strong evaporation and an absence of rainfall will accelerate soil-moisture losses and increase crop stress, particularly in areas that entered the period with limited reserves. Corn moving through pollination will be most vulnerable, while soybeans could withstand the short dry stretch better if rainfall returns as projected.

The outlook has improved somewhat because the ridge is now expected to peak Monday and shift southwestward faster than previously forecast. That movement could allow so-called ridge-rider thunderstorms to return to the northeastern half of the Corn Belt by late Thursday night and continue during the July 16-20 period. Forecast guidance suggests these storm clusters may produce substantially more rainfall than baseline computer models currently indicate, potentially limiting the duration of crop stress and preventing the heat dome from becoming a more serious yield threat.

The Mid-South and Southeast remain in a more favorable pattern, with scattered thunderstorms expected almost daily. Near- to above-normal rainfall and seasonable temperatures should preserve soil-moisture supplies, although localized excessive rainfall and flooding will remain concerns. Overall, the forecast presents a short-term weather premium for grain markets because of the intense heat and dryness, but the faster breakdown of the ridge and the prospect of meaningful rainfall later next week could prevent the pattern from developing into a sustained Corn Belt drought scare.