# Roundup of the week: 25 July 2025 _A round-up of the week’s key developments across politics, markets, and economics — from Trump’s global tariff deals and Germany’s pro-growth pact to updates from W4.0 portfolio companies like Lloyds, NatWest, STMicro, and Wickes. Plus: a view on UK inflation, US rate cuts, and what to expect next week._ Neil Woodford · 25 July 2025 · 15 min read ![An aerial view of a U.S. automotive plant — this week’s U.S.–Japan trade deal saw auto tariffs drop from 25% to 15% with no quotas, unlocking a major win for Japan’s carmakers and helping to lift Toyota and Honda shares by double digits.](https://cdn.sanity.io/images/v3acfbvo/production/d2e6f9536399eda20d6152ac57245d3619c4fa25-5280x3956.jpg?w=1600&fit=max&auto=format) --- Although the “results season” has yet to kick off in earnest, this week has again been busy for the companies I follow. As usual, my objective here is not to highlight everything that has happened across the spectrum of politics, economics, and markets, but to limit commentary to the most important developments. If you think I have missed something you would like to discuss, [please let me know](mailto:hello@noisecancelling.co), and I will give you my view. ## Politics ### US Tariffs Once again, the incredibly energetic President of the US has been busy on the tariff agenda ahead of the important, self-imposed deadline of the 1st August. Deals announced this week include those with Indonesia and the Philippines, who have both agreed to a tariff rate of 19% on goods exported to the US, but most importantly, also with Japan. In this case, a tariff rate of 24% had originally been proposed back in April, and via a proposed 25% rate, agreement has now been reached at 15%. The US and Japan have also stated that Japan will open its markets to US cars and rice. From Japan’s perspective, tariffs on car exports will fall from 25% to 15% and there will be no quotas. While this looks like a good deal for the US on the face of it, the fact that auto tariffs are reduced from 25% to 15% without any quota, and considering that car exports make up the vast majority of Japan’s $63bn trade surplus with the US, means that this is also a good outcome for Japan. This explains why Toyota and Honda’s share prices rallied on the news by 14 and 11 per cent, respectively. Based on this news, optimism about deals with the US’s most important trading partners has increased, albeit that a deal with the EU has yet to be agreed upon, and one with China will presumably wait for the Trump/Xi summit. Late on Wednesday (UK time), news emerged that trade discussions between the US and the EU had made good progress and that an agreement was in reach that would set 15% tariffs for most imports from the EU, apart from steel and aluminium. Importantly, it appears that the deal will include cars, which would be extremely good news for major EU-based automotive companies, including Mercedes-Benz and BMW, both businesses I follow, and which have been confronting a tariff rate of 27.5%. In other tariff news, the potential impact of up to 200% tariffs on imported pharmaceuticals has once again catalysed announcements from major companies about big investments in US pharma manufacturing infrastructure. This time, AZN announced that it would invest $50 billion in the US before 2030 in manufacturing infrastructure in Maryland, Massachusetts, California, Indiana, and Texas, including in “next generation” cell therapy capacity. This announcement follows hot on the heels of Novartis and Roche’s recent announcements of similar scale capital commitments. Alongside huge manufacturing capex commitments from a number of global automotive companies, it is hard not to stand back and applaud the impact Trump’s policies are having on global business investment in the US economy, which, alongside the hyper-scaler commitments, is on a scale I have never seen before. Of course, with this potential agreement and with a China deal to come, Trump’s promise that tariffs would yield hundreds of billions in revenue for the US government appears to be coming true. ### Powell bashing In the last week or so, the frequency and intensity of the attacks on the FED Chairman have diminished, and it now appears as if he will serve out his term, which runs until May next year. Thereafter, along with other appointments, there is a building consensus that Trump will populate the FED board with a more “compliant” group that will enjoy a majority amongst the seven governors. The theory goes that this will then tilt the FED’s policy-making committee towards the kind of policy easing the President desires. Whether this is achievable or not remains to be seen, but in all likelihood, given the macro data emerging from the economy, I still expect a cut in August, but with a more aggressive policy easing bias next year. ### Trump’s AI summit In yet another sign of the US’s commitment to lead in the AI industrial revolution, President Trump said yesterday at this summit that his administration would get rid of a slew of policies and regulations that he said were constraining growth in this vital industry. He added that his “AI action plan would spur technology development and ensure that the US did not fall behind China”. Regarding policy action, Trump said his administration would fast-track permitting for AI construction projects and data centres and withhold funding from projects in states with “burdensome” regulations. It’s hard not to be impressed with the urgency the US economy and political system is committing to win this vital race. ### UK’s fiscal position The UK’s fiscal position has been the subject of increasingly hyperbolic media rhetoric in the last week or so following June’s borrowing numbers, which were above consensus forecasts. Borrowing in Q2 was pretty much exactly in line with the OBR’s forecasts, despite the higher number in June. However, the Pavlovian media reaction to the data was, in my view, once again, misplaced. The high June number directly resulted from the £10.9bn increase in government debt costs relating specifically to higher index-linked interest costs. This, in turn, was a direct product of the high inflation (RPI) number in April of 1.7% MOM, which in turn was largely the direct product of higher “administered” inflation, which the government has played a very big part in creating as a result of its energy policies and October 24 budget measures. (see below) ![Roundup of the week: 25 July 2025](https://cdn.sanity.io/images/v3acfbvo/production/2e369d769267e7ba83ca731b4cc94efebc5a0096-2268x1374.png?w=1600&fit=max&auto=format) Unfortunately, the speculation in the media about the near certainty of tax increases in the Autumn to plug the “hole in the Nation’s finances” will not help build confidence in the economy, which is, to some extent, a prerequisite for households to save less and spend more. My view is that tax increases will not be necessary in the upcoming budget and that the borrowing numbers should remain on target with the OBR’s expectations, but whilst Rachael Reeves appears to be incapable of saying anything on the subject, and the OBR remains silent, the resulting vacuum will be filled with more potentially damaging speculation. As for the outlook for UK inflation and interest rates, I still expect a painfully cautious MPC to cut in early August. In a strange parallel universe in which I was on the MPC, I would recommend a 50bps cut. In all likelihood, they will opt for 25bps (from 4.25% to 4%). As for the immediate future, inflation is likely to stay at its elevated level through the summer and then start to fall rapidly through the Autumn. We already know that gas and electricity prices will come down in July (the price cap was announced in May and will see a 7% reduction for the period from July through to September), and there will be better news on headline inflation in October because of base effects. In October 2024, gas prices rose by 12% and electricity prices rose by 7%. Consequently, if they just stay the same this October, there will be a big base effect reduction in inflation as a result. Of potentially greater importance will be ongoing reductions in wage settlements, where the news continues to show awards migrating back down to 3%. This will please the MPC. Significantly, core inflation (which excludes energy, food, alcohol, and tobacco) in the UK (as opposed to the headline) has remained broadly steady over the last twelve months, but significantly, it will be lower next year because of lower wage settlements. In summary, taking in all the moving parts, and accepting that I might sound ludicrously optimistic, the news on inflation and interest rates, and in turn debt funding costs, and maybe the deficit, and possibly, ultimately, growth, is about to get better, possibly a lot better. Quite what a hysterically bearish consensus will make of this, I do not know. ### Germany’s leading companies and a pact with the government? This story will not have attracted much attention outside of Germany, but I thought it was pretty important, not just for the German economy, which has been in the doldrums for over two years, but also as a precedent for what it may eventually trigger across Europe and possibly even here in the UK. In summary, 61 major industrial companies across Germany have launched an initiative called Made for Germany. Together these corporations which represent a third of the German economy have stated that they want to invest Euros 631bn ($733bn) in Germany over the next three years on existing infrastructure, new factories and R&D in exchange for, critically, lower regulation, bureaucracy and social security contributions which push up the cost of labour (compare and contrast with labour’s budget last October). As part of this package and anticipating this commitment, the German government has also authorised higher borrowing to finance investment in ailing German infrastructure, transport, energy networks and digitisation. Of potentially even greater importance, given what I highlighted last week regarding the German industry demanding lower electricity prices, energy prices will be reduced, new tax reliefs (capital allowances) will be introduced, and corporation tax will be lowered. Once again, it seems as if a major competitor to the UK economy has acknowledged, in part, the harm inflicted on its industrial base by the charge to net zero. I wonder how long the current UK government will stick its collective head in the sand on this profoundly important issue, but with the US embracing a radically different energy policy and with Germany now, at least in part, acknowledging the damage done by its embrace of net zero, the pressure is mounting. ## Economics ### US jobless claims This week has been a little thin for major economic announcements in the UK. In the US, the most significant release was today’s initial jobless claims. These data came in once again better than expected. To some extent, they confirm the underlying resilience and buoyancy of the US economy, but at the same time make it slightly harder for the FED to cut rates in August (I still think they will). Given the underlying strength that these data point to in the labour market, I suspect there will be rate-setting committee members that will continue to argue that the US doesn’t need lower rates right now. My guess is that the good recent inflation data and the political pressure that is bearing down on Powell and the committee overall will be sufficient to persuade the committee to do something now. (It’s also the case that the recent news on tariffs should at the very least persuade some members that their worst expectations on tariffs will not now be met.) ## Markets The results season has kicked off, and quite a few of the companies I follow have issued updates, which are covered below. For the next few weeks, the intensity of announcements will increase significantly, and in the interests of keeping this update to manageable proportions, I don’t propose to highlight everything. I will endeavour to keep this update focused on the most important announcements or those that catalyse the biggest reactions. ### STMicro Once again, quarterly results from a globally leading chip business have resulted in a relatively extreme share price reaction. (ST Micro’s share price is down about 12% on its Q2 numbers today) Before I delve into the detail of the release, my view is that given how well the share price had performed leading up to these numbers, I am not surprised to see today’s setback. As ever, for me, the divergence between my view and what appears to be the market’s interpretation today is explained by the difference in investment perspective. The market is inherently very short-term, and I am focused on the medium and long term. As for the numbers, the quarterly outcome was behind expectations but only because of $190mn of impairment, restructuring, and phase-out costs related to a previously announced programme to reshape the company’s manufacturing footprint and global cost base. Before these one-off costs, the Q2 result, at $57mn, was in fact slightly ahead of a consensus expectation of $54mn. Q2 revenue and margin were both slightly ahead of expectations, but apparently, the guidance for Q3 was disappointing. (Not to me) The company’s CEO said on the call that the outlook for Q3 (where revenue is in line with expectations) was impacted negatively by one customer but stated that this was a temporary setback and that growth would return in Q4. In summary, I believe the business is on track to deliver the revenue and profitability recovery I expected as the industries it serves (automotive, industrial, consumer electronics, and communication equipment) grow demand, and the inventory and price cycle that has held the semiconductor industry down for the last two years comes to an end. ### Lloyds Bank Lloyds has kicked off the banking reporting season, and in summary, its PBT was 16% ahead of consensus expectations, although interestingly, 12% of that was the release of an expected credit loss taken in the Q1 numbers when Lloyds took a Trump-related tariff provision, which at the time I thought was a bit silly. The bank has guided to a 25bps full-year impairment outcome despite the fact that so far, the outcome has been 19bps. Interest income was up 1% and slightly behind expectations, but non-interest income was up 9% YOY. Perhaps most significant from my perspective is the guidance for a 13.5% return on tangible equity in 2025, which will increase next year to at least 15%. Lloyds is valued currently at just under 1.1x book (Bloomberg consensus) for next year, which in my opinion looks way too low for an asset that will deliver over 3x the risk-free rate as represented by the current 10-year gilt yield of 4.6%. ### NatWest Hot on the heels of Lloyds’ good numbers, NatWest announced its interim results today (Friday). If anything, these are even better than Lloyds, with profit before tax 7% above consensus and pre-provision profit 4% above as a result of better-than-expected non-interest income and significantly better cost control. (The cost income ratio at the same stage last year was 59% and has fallen in these numbers to 54.2%) Looking forward, buybacks recommence, revenue guidance has been increased for the full year, and the interim dividend is 4% higher than expectations, and 58% higher than last year’s interim payment. Once again, perhaps the most encouraging aspect of these numbers is the 2027 return on tangible equity (ROTE) guidance, which remains above 15%, which, for an asset trading on (Bloomberg consensus) 1.06x 2026 book, as with Lloyds, looks significantly too low. ### Wickes Wickes has announced a trading update for the six months ending June this year. In an encouraging report, Wickes reported like-for-like sales in its retail business of 8.3% in the quarter, 5.7% in its design and installation business, and just shy of 7% overall. This outcome is considerably ahead of expectations and shows a substantial acceleration on Q1’s 1.6% LFL revenue growth. Encouragingly, this outcome is really all about volume growth rather than price. Finally, the CEO guided to a full-year outcome in line with consensus, but given the momentum in the business, I suspect the business may well do better than this. ### Breedon Earlier this week, Breedon announced its interim results for the six months to the end of June. The results were a little disappointing and reflected a number of one-off challenges in the first half, including poor weather in the US, project delays in Ireland, and a generally difficult market backdrop in the UK. Having said that, and while recognising that the full-year outcome will be at the lower end of consensus expectations, the business also highlighted the structural demand drivers in the UK in the statement, which it and I believe will drive strong growth in the business over the medium and long term. Reflecting this longer-term confidence in its outlook, the business announced a 6% increase in its interim dividend. ### Marshalls Marshalls has also released a trading statement today (Friday). In common with Breedon, Marshalls is exposed to the UK’s construction markets and its statement echoes the tough current trading conditions Breedon spoke about in its trading update. It seems that the UK construction industry has yet to experience the growth that some analysts and I have been anticipating. In some ways, this is not surprising given how slow the MPC has been in reducing interest rates and how planning delays and bureaucracy have held back the recovery in new house building, something which appears to be so important to the incumbent government. Marshalls has guided to a difficult 2025 and reduced profit guidance, and the share price has followed suit and is down significantly. Despite this disappointment, I still expect that we will see significantly better trading conditions in the UK construction industry in the medium term, and that may start to emerge as early as next month when I expect the MPC to cut interest rates. One interesting point to highlight is the significant divergence between the heavy-end construction market and the very buoyant trading conditions experienced by Wickes. Sooner or later, I expect the former to catch up with the latter as interest rates continue to fall over the next twelve months. ### Mag 7 Although none of these well-known and highly regarded businesses are among the companies I follow, they act as bellwethers for the US equity market and markets more broadly. I have been cautious about their valuations for some time and remain so. Yesterday, Alphabet and Tesla announced their Q2 results. Although both businesses beat expectations, neither was able to overcome current concerns. Tesla’s CEO spoke about challenging conditions in its automotive businesses, where revenues were down 16% as it grapples with the scrapping of green subsidies and intense Chinese competition. Its energy generation and storage business was also down in the quarter, which saw an overall revenue decline of 12%. Elon Musk spent quite a lot of time in the meeting talking about the longer-term aspirations for the business as it pivots towards growth driven by robotaxis and humanoid robots. We shall see, but concerns about the current core business will dominate investor sentiment. Alphabet also beat expectations, driven by good growth in its cloud and search businesses. However, in common with other businesses in this group of so-called hyperscalers, spending on AI is rising rapidly. Just three months ago, the CEO announced a capex plan for 2025 of $75bn, but that has now increased significantly to $85bn. After a strong rally from the early April lows, the shares were broadly stable on the numbers. ### Sarepta I wrote extensively about this business last week, and once again, it is the news. After announcing that an “agreement” had been reached to keep Elevidys on the market (for ambulatory patients), another patient's death was announced, this time in a clinical trial of a new gene therapy. Without delving once again into the arcane details of this complicated situation, I think it’s worth highlighting how incredibly bearish consensus has become on the business and its future. Some analysts have said that the business is now worth nothing, and others still recommend selling the stock. I find these extreme views understandable but hard to rationalise. As the business highlighted last week, it expects its drug portfolio of four approved medications to generate a combined $1.4bn of annualised revenue going forward. Set against a current EV of just $1.9bn, and with the business expecting to deliver a profit next year, this valuation is beginning to look more than very depressed. Whilst the uncertainty continues, I suspect the share price will remain at around current levels, but if there are developments in the near future which create more clarity about the company’s future and that of its therapies and the patients that take them, then I expect this to lead to a more rational valuation. ## What to look out for next week 1. Lots of results and trading statements – it’s going to be very busy. 2. More US labour market data on Friday.