Category: Economoney

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Trump’s self-imposed August tariff deadline looms

U.S. Tariffs

Since a little after Donald Trump’s declaration of ‘Liberation Day’ and renewed tariff threats, global markets have shown a remarkable degree of indifference.

While equities dipped briefly in April, investors appear increasingly unshaken by the looming 1st August deadline.

Several factors underpin this resilience. First, market participants have grown accustomed to political brinkmanship.

Traders now view tariff announcements as bargaining tools rather than certainties, adopting a wait-and-see approach before pricing in long-term consequences.

The episodic nature of past trade spats has dulled their impact, especially without immediate legislative backing and with Trump often pulling back last minute or extending deadlines.

The media have labelled this … TACO!

TACO – Trump Always Chickens Out: Definition – A satirical acronym coined by financial commentators to describe Donald Trump’s predictable pattern of announcing aggressive tariffs, then softening or delaying them under market pressure.

Second, economic fundamentals remain firm. Corporate earnings continue to surpass expectations, and key indicators—such as job growth and consumer spending—suggest sustained momentum in major economies.

As a result, the tariff narrative has taken a back seat to earnings reports and central bank manoeuvres.

Third, diversification strategies have matured since the 2018–2020 trade wars. Many multinationals have already restructured supply chains, buffered risk through regional trade agreements, and hedged exposure to volatile sectors.

This strategic evolution makes markets less sensitive to unilateral tariff threats, especially if they lack multilateral support.

Analysts note that Trump’s rhetoric still carries weight politically, but the financial world operates on evidence, not headlines. As one strategist quipped, ‘Markets don’t trade on bluster; they trade on impact’.

That’s all very well – but markets can be fickle and reflect sentiment too.

With investors focused on earnings and monetary policy, tariff drama may remain background noise—unless policy becomes policy.

Until then, the markets seem content to roll with it!

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UK auto production for May 2025 slumps to lowest level since 1949

UK auto makers production slumps

New car and commercial vehicle production in the U.K. dropped by 32.8% last month, totalling 49,810 units, as reported by the Society of Motor Manufacturers and Traders (SMMT).

Excluding 2020, when factories were closed during Covid-19 lockdowns, U.K. vehicle production in May 2025 dropped to its lowest level since 1949 – that’s the worst performance in 75 years!

The significant drop in car production is largely attributed to ongoing model updates, restructuring efforts, and the effects of Trump’s tariffs, according to SMMT.

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UK jobs market slows as unemployment rises

UK labour market

The UK jobs market continued to lose momentum, with fresh data from the Office for National Statistics highlighting a notable slowdown.

Unemployment has climbed to 4.7%, reaching its highest level in four years, while job vacancies fell for a third consecutive year to 727,000—the lowest in a decade, excluding the pandemic dip.

Pay growth also eased, with average annual wage increases slowing to 5% in the March–May 2025 period.

Economists suggest the Bank of England may consider an interest rate cut next month to support employment, although rising inflation remains a complicating factor.

Firms appear hesitant to hire or replace staff, signalling broader economic uncertainty. While the ONS has urged caution around the collection of unemployment data, the trend points to mounting pressure in the UK’s jobs landscape.

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UK inflation unexpectedly climbs to 3.6% in June 2025

UK inflation up!

The latest UK inflation figure of 3.6% is a setback for those hoping for a steady decline, especially after May’s 3.4%.

With core inflation and food prices also climbing, it’s a sign that underlying price pressures remain stubborn.

It further complicates the Bank of England’s path towards interest rate cuts and dents optimism for faster economic relief.

Summary

📈 Headline CPI: Increased to 3.6%, up from 3.4% in May 2024

🔍 Core inflation (excluding food, energy, alcohol, and tobacco): Rose to 3.7%, from 3.5%

🛒 Food inflation: Climbed to 4.5%, its highest level in over a year

⛽ Motor fuel prices: Were the largest contributor to the monthly rise

📊 Monthly CPI change: Up 0.3%, compared to 0.2% the previous month

This hotter-than-expected reading has sparked debate over the Bank of England’s next move.

While a rate cut in August 2025 is still widely anticipated, the inflation uptick may prompt a more cautious approach thereafter.

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U.S. inflation ticks up in June 2025

U.S. inflation

As of June 2025, the U.S. annual inflation rate rose to 2.7%, marking its highest level since February 2025.

This uptick was largely driven by new tariffs imposed by President Trump, which increased costs on goods like furniture, clothing, and appliances.

On a monthly basis, U.S. consumer prices climbed 0.3% from May to June, up from a modest 0.1% increase the previous month.

📊 Core inflation—which excludes food and energy—also edged up to 2.9% year-on-year, with a 0.2% monthly increase, suggesting underlying price pressures are building.

Summary

📈 Headline CPI: rose 2.7% year-over-year

🔍 Core inflation (excluding food and energy) climbed to 2.9% annually

📊 Monthly increases: 0.3% for headline CPI, 0.2% for core inflation

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FTSE 100 breaks 9000 barrier in historic rally – hitting new all-time intraday high!

FTSE 100 ascent above 9,000

The FTSE 100 surged past the 9,000-point mark on 15th July 2025, setting a new all-time high and signalling renewed investor confidence in the UK’s economic outlook.

Driven by strong performances in energy, banking, and AI-adjacent tech firms, the benchmark index shattered psychological resistance with broad-based gains.

Much of the momentum came from robust earnings reports and upbeat forecasts from major constituents such as Shell and HSBC.

Analysts also pointed to growing international interest in UK equities, especially as sterling remains relatively stable amid global currency fluctuations.

The breakthrough follows months of resilience in the face of inflationary pressures and geopolitical uncertainty.

Investors appear to be rewarding UK equities as a steady alternative option against the backdrop of U.S. market turmoil – maybe the U.S.is running out of steam?

While traders welcomed the milestone, some caution against irrational exuberance. Crossing 9,000 is significant, but sustainability depends on whether earnings growth can be maintained

Nonetheless, market watchers view the rally as a strong signal of the FTSE 100’s ability to compete globally.

With fresh liquidity and stabilising rates, the index might not just pause at 9,000 — it may soon look to test even higher ground.

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Markets appear to dismiss Trump’s tariff threats – but will this prove to be unwise?

Super Chicken

Despite President Donald Trump’s renewed push for sweeping tariffs, global markets appear unfazed.

Trump issued letters to 14 countries – including Japan, South Korea, and Malaysia—outlining new import levies ranging from 25% to 40%, set to take effect on 1st August 2025. More letters then followed.

Yet, major indices like the FTSE 100 and Nikkei 225 barely flinched, with some even posting modest gains.

So, who’s right—the president or the markets?

Trump insists tariffs are essential to redress trade imbalances and bring manufacturing back to the U.S. The EU also faces higher tariffs.

He’s floated extreme measures, including a 200% tariff on pharmaceuticals and a 50% levy on copper.

His administration argues these moves will strengthen domestic industry and reduce reliance on foreign supply chains.

However, investors seem to be betting on a familiar pattern: Trump talks tough but ultimately softens under pressure. Analysts have dubbed this the ‘TACO’ trade—Trump Always Chickens Out.

His own comments have added to the ambiguity, calling the August deadline ‘firm, but not 100% firm’.

The economic logic behind the tariffs is being questioned. Tariffs are paid by importers—often U.S. businesses and consumers—not foreign governments.

This could lead to higher prices and inflation, especially in sectors like healthcare and electronics. Some economists warn of recessionary risks for countries like Japan and South Korea.

In short, markets may be right to remain calm—for now. But if Trump follows through, the impact could be far-reaching.

With trade negotiations still in flux and only two deals (UK and Vietnam) finalised, the next few weeks will be critical. Investors may be wise not to ignore the warning signs entirely.

Whether this is brinkmanship or a genuine shift in trade policy, the stakes are high—and the clock is ticking.

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UK economy contracts in May 2025 amid global tariff trade turmoil

UK GDP squeezed

Britain’s economy shrank by 0.1% in May 2025, marking its second consecutive monthly decline and casting fresh doubt over the strength of the post-pandemic recovery.

The latest figures from the Office for National Statistics defied analyst expectations of modest growth, underlining deepening concerns within the Treasury and among business groups.

The drop was largely driven by a sharp 0.9% fall in production output, particularly in oil and car manufacturing, alongside a 0.6% decline in construction activity.

These weaknesses come despite a slight uptick in services, which rose by 0.1%, buoyed by gains in legal services and software development.

Summary

🏭 Production output fell by 0.9%, led by declines inl oil and gas extraction and car manufacturing.

🏗️ Construction dropped 0.6%, reversing April’s gains.

🛍️ Services eked out a 0.1% rise, with legal services and computer programming offsetting a sharp fall in retail.

Finance Minister Rachel Reeves faces increasing pressure as her economic reboot agenda collides with rising domestic costs and global headwinds.

April’s national insurance hikes and Trump’s aggressive tariff policy have created economic drag, despite the UK having brokered a swift bilateral trade agreement with the U.S.

The three-month growth rate stands at 0.5%, but economists now predict a meagre 0.1% expansion for the second quarter.

With inflation edging back above 3% and interest rate cuts looming, the government must navigate a delicate balance between stimulus and stability.

The first official Q2 GDP estimate will be released on 14th August 2025, with markets braced for further volatility.

UK GDP figures February through May 2025

Month% Change in GDPKey Drivers/Comments
February+0.5%Strong services and frontloaded activity pre-tariffs
March+0.2%Moderate growth, tax rise concerns begin
April–0.3%Domestic tax hikes, Trump tariff shock
May–0.1%Production –0.9%, construction –0.6%; weak manufacturing
UK GDP figures February through May 2025

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U.S. debt surges close to $37 trillion after ‘Big Beautiful Bill’ -Elon Musk sounds alarm

High U.S. debt levels

Following the passage of President Donald Trump’s sweeping tax and spending legislation, dubbed the One Big Beautiful Bill, the U.S. national debt has officially soared to nearly $37 trillion, with projections suggesting it could hit $40 trillion by year’s end.

The bill, which extends 2017 tax cuts and introduces expansive spending on defence, border security, and domestic manufacturing, has sparked fierce debate across Washington and Wall Street.

Critics argue the legislation lacks meaningful offsets, with no new taxes or spending cuts to balance its provisions.

Interest payments alone reached $1.1 trillion in 2024, surpassing the defence budget. The Congressional Budget Office estimates the bill could add $3.3 trillion to the deficit over the next decade.

Among the most vocal opponents is tech billionaire Elon Musk, who previously served as head of the Department of Government Efficiency (DOGE).

Musk has labelled the bill a ‘disgusting abominatio’ and warned it undermines fiscal responsibility.

He has reportedly pledged to fund primary challengers against Republicans who supported the measure, accusing them of betraying their promises to reduce spending.

Musk’s concerns go beyond economics. He argues the bill reflects a broken political system dominated by self-interest, calling for the creation of a new political movement, the America Party, to restore accountability.

While the White House insists the bill will spur economic growth and eventually reduce the debt-to-GDP ratio, sceptics remain unconvinced.

With the debt ceiling raised by a record $5 trillion, the long-term implications for America’s financial stability are now front and centre.

As the dust settles, the clash between Trump’s fiscal vision and Musk’s warnings sets the stage for a turbulent political and economic period ahead.

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Trump shifts tariff ‘goal posts’ again and targets BRICS with extra 10% levy

Goal posts moved

In a fresh escalation of trade tensions, President Donald Trump has once again moved the goalposts on tariff policy, pushing the deadline for new trade deals to 1st August 2025.

This marks the second extension since the original April 2025 ‘Liberation Day’ announcement, which had already stirred global markets.

The latest twist includes a new 10% tariff targeting countries aligned with the BRICS bloc—Brazil, Russia, India, China, and South Africa – along with newer members such as Iran and the UAE.

Trump declared on Truth Social that ‘any country aligning themselves with the Anti-American policies of BRICS will be charged an ADDITIONAL 10% tariff. There will be no exceptions’.

The move has drawn sharp criticism from BRICS leaders, who condemned the tariffs as ‘indiscriminate’ and warned of rising protectionism. Industrial metals, including copper and aluminium, saw immediate price drops amid fears of disrupted supply chains.

While the White House insists the new deadline allows more time for negotiation, analysts warn the uncertainty could dampen global trade and investor confidence.

With letters outlining tariff terms expected to be sent this week, investors and market makers watch closely as Trump’s trade strategy continues to evolve or unravel.

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Eurozone inflation hits ECB target in June 2025

ECB hits EU Inflation target

Eurozone inflation edged up to 2.0% in June, aligning precisely with the European Central Bank’s (ECB) target and marking a slight increase from 1.9% in May 2025.

The small rise was largely driven by persistent services inflation, which climbed to 3.3%, and steady increases in food, alcohol, and tobacco prices at 3.1%.

Core inflation, which excludes volatile items like energy and food, held firm at 2.3%, suggesting underlying price pressures remain stable. Energy prices, however, continued to decline, easing some of the broader inflationary strain.

The ECB, having already cut interest rates earlier this year, now faces a delicate balancing act. While inflation appears under control, economic growth remains sluggish, and ongoing trade tensions – particularly with the U.S. – could complicate the outlook.

With inflation now at target, attention shifts to whether the ECB will pause further rate cuts or act again to support the eurozone’s fragile recovery.

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From Missiles to Tariffs: A desensitised stock market faces Trump’s new world

Markets desensitised to U.S. policy making

In years past, the mere hint of U.S. airstrikes or heightened geopolitical tension would send global stock markets into panic mode.

Yet, following President Trump’s re-election and his increasingly aggressive foreign policy stance, investor reactions have become notably muted.

From missile strikes on Iranian nuclear sites to an orchestrated ceasefire between Iran and Israel, markets have barely flinched. The question arises: are investors becoming desensitised to Trump’s geopolitical theatre?

Take the latest skirmish between Iran and Israel. After nearly two weeks of missile exchanges, Trump’s announcement of a ‘complete and total ceasefire’ barely nudged the S&P 500.

That calm came despite the U.S. launching pre-emptive strikes on Iranian facilities and absorbing retaliatory attacks on its military base in Qatar.

In another era, or under a different administration even, such developments might have triggered a broad risk-off sentiment. Instead, Wall Street just shrugged.

One reason may be fatigue. Trump’s approach – rife with tariffs, sanctions, and sudden reversals – has bred a kind of market immunity.

Investors, well-versed in the rhythm of Trump’s provocations, have begun treating them as background noise. His revived tariff agenda, particularly the threats aimed once again at China and EU auto imports, has likewise failed to prompt major selloffs.

Similarly, the ongoing Russia-Ukraine conflict, once a source of intense volatility, now registers as a strategic stalemate in the market’s eyes.

While Trump’s rhetoric surrounding Ukraine has shifted unpredictably, investors appear more focused on earnings, inflation data, and central bank signals than on diplomatic fallout and war!

This is not to suggest markets are indifferent to geopolitical risk, but rather that they’ve adapted. Algorithmic trading models may be increasingly geared to discount Trump’s headline-grabbing tactics, while institutional investors hedge through gold, volatility indices, or energy plays without dumping equities outright.

Critics argue this detachment is dangerous. Should a flashpoint spiral out of control, be it over Hormuz, Ukraine, or Taiwan, the slow-boiling complacency could leave portfolios badly exposed.

Still, for now, Trump’s policies are being priced in not with panic, but with complacency maybe.

The real story may not be what Trump does next, but how long the markets can continue to look away.

Trump announces he had brokered ceasefire between Israel and Iran?

Tensions between Israel and Iran reached a boiling point after 12 days of cross-border missile and drone strikes.

The situation escalated further when U.S. forces under President Trump launched targeted airstrikes on key Iranian nuclear sites, Fordow, Natanz, and Isfahan, prompting a direct Iranian missile response on a U.S. base in Qatar.

In a dramatic turn, President Trump announced what he called a ‘Complete and Total CEASEFIRE‘ – announced on Truth Social. According to Trump’s plan, Iran would begin the ceasefire immediately, with Israel to follow 12 hours later.

The truce would reportedly be considered complete after 24 hours if all attacks stopped.

While Trump touted the ceasefire as a triumph of ‘peace through strength’, analysts questioned the ceasefire’s enforceability – especially since missile exchanges reportedly continued despite the announcement.

Nonetheless, Trump claimed credit for halting the region’s slide into all-out war without committing to prolonged U.S. military involvement.

Critics argue Trump’s strategy relies more on military pressure and media theatrics than diplomatic engagement.

Supporters counter that his boldness forced both sides to the table. Either way, the world is watching to see whether this fragile peace endures – or erupts again in fire.

If this turns out to be a masterstroke in political brinkmanship – hats off to Trump, I guess. Whichever way you look at it, the precision U.S. strike on Iran was exactly that – precision. And, you have to take note.

Iran has been weakened, and this may even influence Russia’s war on Ukraine. Hopefully Israel with Palestine too – regardless of stock market reaction.

And that has to be a good thing!

But has Israel finished their war?

Despite all the noise regarding stock market reaction, one thing is for certain – the anxiety and worry for the people of the Middle East is unquestionable.

It’s not a happy time.

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Japan rice price spikes by 101% – highest in 50 years and inflation jumps to highest level since 2023

Japan Rice up highest for 50 years

Japan has been jolted by a dramatic spike in rice prices, which surged by 101.7% year-on-year in May 2025 – the most significant increase in over fifty years.

This sharp rise in the cost of the country’s staple food has contributed heavily to Japan’s inflation, which jumped to 3.7%, marking its highest point since January 2023.

The Bank of Japan (BOJ) now faces mounting pressure, as this marks the 38th consecutive month inflation has surpassed the Bank’s 2% target.

Notably, the ‘core-core’ inflation rate, excluding fresh food and energy rose to 3.30%, an indication that broader cost pressures are sticking.

The government has begun releasing emergency rice stockpiles in an attempt to dampen prices, but analysts remain cautious.

With rice accounting for nearly half of Japan’s core inflation, its influence stretches well beyond supermarket aisles. A continued rise could affect everything from packaged goods to restaurant prices.

Despite calls for tightening policy, the BOJ has opted to keep interest rates at 0.5%, citing expectations of inflation easing in the coming months.

However, with geopolitical tensions and supply chain factors still looming, the outlook remains uncertain.

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Switzerland enters era of zero interest rates

0% Switzerland Interest Rate

Switzerland has officially re-entered an era of zero interest rates, following a 0.25% cut by the Swiss National Bank (SNB) on 19th June 2025.

The move, though widely expected, marks a significant shift in monetary policy as the nation grapples not with inflation – but deflation.

Consumer prices in May dipped 0.1% year-on-year, driven largely by the enduring strength of the Swiss franc.

The SNB cited diminished inflationary pressure as the rationale behind the cut and indicated it remains focused on long-term price stability.

Chairman Martin Schlegel emphasised that short-term negative inflation readings weren’t the primary motivator. Instead, the Bank revised its inflation forecast down to 0.2% for 2025 and 0.5% for 2026.

Switzerland’s strong currency continues to weigh heavily on imported goods prices – an especially potent factor in a small, open economy.

Analysts suggest the SNB may go lower if inflation fails to rise, sparking speculation about a return to negative rates.

This development sets Switzerland apart from other major economies still battling inflation, underscoring the unique challenge of managing deflation in a world accustomed to rate hikes.

The next SNB policy decision is due in September 2025. Until then, all eyes remain on the franc – and the fallout.

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Bank of England holds UK interest rate at 4.25%

UK interest Rate

The Bank of England held its base interest rate steady at 4.25% on Thursday 19th June 2025, with a 6–3 vote from the Monetary Policy Committee (MPC).

Three members pushed for a 0.25% cut, but the majority opted for caution amid persistent inflation and global uncertainty.

Inflation ticked up slightly to 3.4% in May, driven by regulated prices and earlier energy cost increases.

While wage growth is easing and the labour market is loosening, the Bank signalled it’s not ready to ease policy further just yet

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U.S. holds interest rates steady – Trump isn’t happy!

U.S. Interest Rate

U.S. Federal Reserve has kept its benchmark interest rate steady at 4.25% to 4.50% for the fourth consecutive meeting.

This decision reflects a cautious stance amid ongoing uncertainty surrounding President Trump’s tariff policies and their potential impact on inflation and economic growth.

The Fed still anticipates two rate cuts later in 2025, but officials are split – some expect none or just one cut.

Inflation projections have been revised upward to 3.0% for 2025, while economic growth expectations have been trimmed to 1.4%.

U.S. President Donald Trump has been sharply critical of Federal Reserve Chair Jerome Powell, especially following the Fed’s decision on June 18, 2025, to keep interest rates steady.

He’s called Powell ‘a stupid person’, ‘destructive’, and ‘Too Late Powell’. accusing him of being politically motivated and slow to act on rate cuts.

And the Federal Reserve is supposed to act independently of political influence.

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UK economy shrank in April 2025

UK flag on a squeezed bottle

The UK economy contracted by 0.3% in April 2025, a sharper decline than the 0.1% forecast by economists, according to the Office for National Statistics (ONS).

The unexpected downturn has raised fresh concerns about the country’s economic resilience amid rising costs and global trade tensions.

April’s contraction was driven by a combination of domestic and international pressures. A significant rise in employers’ National Insurance contributions, coupled with increases in water, energy, and council tax bills, placed added pressure on businesses and households.

Simultaneously, newly imposed U.S. tariffs, introduced by President Trump, led to the steepest monthly drop in UK exports to the United States on record.

Services and manufacturing, which together form the backbone of the UK economy, both saw declines.

Legal and real estate sectors were particularly affected, following a surge in house sales in March 2025 ahead of stamp duty changes. Car manufacturing also faltered after a strong first quarter.

Despite the monthly setback, UK GDP still grew by 0.7% over the three months to April 2025, suggesting some economic activity may have been pulled forward earlier in the year.

Chancellor Rachel Reeves reportedly acknowledged the figures were ‘clearly disappointing’ but reaffirmed her commitment to long-term growth through strategic investments in infrastructure, housing, and energy.

While April’s figures may not signal an immediate crisis, they underscore the fragility of the UK’s recovery.

With UK inflation still above target and interest rates elevated, the UK government faces a delicate balancing act to sustain momentum without stifling growth.

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U.S. inflation up 0.1% in May – but less than expected

U.S. inflation

In May 2025, U.S. inflation rose by 0.1% from the previous month, bringing the annual inflation rate to 2.4%, slightly below economists’ predictions of 2.5%.

Core U.S. inflation, which excludes food and energy, increased by 0.1% month-on-month, with a year-on-year rate of 2.8%.

The modest rise was largely offset by falling energy prices, particularly a 2.6% drop in petrol, which helped keep overall inflation in check.

Prices for new and used vehicles, as well as apparel, also declined. Meanwhile, food and housing (shelter) costs each rose by 0.3%, with housing (shelter) being the primary contributor to the monthly increase.

Despite President Trump’s sweeping tariffs introduced in April 2025, their inflationary impact has yet to fully materialise. Analysts suggest that many companies are still working through pre-tariff inventories, delaying price hikes for consumers.

However, economists caution that the effects may become more pronounced in the coming months.

The Federal Reserve is expected to hold interest rates steady for now, as U.S. policymakers monitor whether inflation remains contained or begins to accelerate due to trade-related pressures.

Markets responded positively to the data, with stock futures rising and Treasury yields falling.

So, while inflation remains above the Fed’s 2% target, May’s figures suggest a temporary reprieve.

The summer could yet tell a different story.

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China suffers U.S. tariff driven falls in exports and increased deflation concerns

China exports to U.S. suffer due to tariffs

China’s economic landscape is facing mounting challenges as exports to the United States plummet and consumer prices decline, sparking fears of deflation.

The latest trade data reveals that Chinese exports to the U.S. fell by 34.5% in May 2025, marking the sharpest drop in over five years. This decline comes despite a temporary trade truce that paused most tariffs for 90 days.

China’s consumer prices have continued their downward trend, raising concerns about deflation and its long-term impact on the economy.

The sharp fall in exports is largely attributed to high U.S. tariffs and weakening demand. While China’s overall exports grew by 4.8%, shipments to the U.S. suffered significantly, reflecting the ongoing trade tensions between the two economic giants.

Imports from the U.S. also dropped by 18%, further shrinking China’s trade surplus with America. In response, Chinese exporters are shifting their focus to other markets, particularly Southeast Asia and Europe, where demand remains relatively strong.

China’s CPI reading

At the same time, China’s consumer price index (CPI) fell by 0.1% in May 2025, deepening concerns about deflation. Deflation, the opposite of inflation, can lead to lower corporate profits, wage cuts, and job losses, creating a vicious cycle of economic stagnation.

The decline in consumer prices is largely driven by weak domestic demand, exacerbated by the ongoing real estate crisis. Many Chinese consumers are hesitant to spend, fearing further declines in property values and economic uncertainty.

China’s rare earth materials olive branch

China appears to have offered U.S. and European auto manufacturers a reprieve after industry groups warned of increasing production threats over a rare earth shortage.

China’s Ministry of Commerce on Saturday 7th June 2025 reportedly said it was willing to establish a so-called ‘green channel’ for eligible export licence applications to expedite the approval process to European Union firms. 

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ECB cuts interest rate to 2%

EU interest rate at 2%

The European Central Bank (ECB) announced a 0.25% rate cut on 5th June 2025, lowering the deposit facility rate to 2%.

This marks the seventh consecutive rate cut as the ECB continues its monetary easing cycle.

ECB President Christine Lagarde emphasised that inflation has fallen below the 2% target, but economic growth remains sluggish.

Investors are now watching for further rate cuts later in the year, with markets pricing in another 0.25% reduction in October.

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Debt and trade issues weaken UK growth – so says the OECD

UK growth

The latest OECD report presents a cautious outlook for the UK economy, predicting slower growth amidst global uncertainties and domestic fiscal challenges.

The UK’s GDP is projected to grow by 1.3% in 2025 and 1% in 2026, reflecting a slight downward revision.

According to the OECD, trade tensions, particularly U.S. tariffs, are disrupting global supply chains and weakening business confidence.

At the same time, consumer sentiment remains low, and business investment is expected to decline, counteracting the benefits of recent government spending initiatives.

A significant concern highlighted in the report is the UK’s public finances. The OECD warns that the government’s limited fiscal buffers could leave the economy vulnerable to future downturns.

It suggests targeted spending cuts and tax reforms, including a reassessment of council tax bands to reflect updated property valuations.

Debt interest

The OECD has warned that high interest payments on government debt and trade tensions are weighing on the UK’s economic growth. The UK’s fiscal position is described as having ‘very thin’ margins, meaning there is little room for unexpected financial shocks – of which there have been many.

Despite these hurdles, the UK is expected to outperform some major European economies, including France and Germany. However, the UK government face a complex challenge, balancing growth stimulation with fiscal responsibility.

The OECD encourages the government to accelerate infrastructure investments and enhance productivity to ensure long-term economic resilience.

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Eurozone inflation falls below ECB target of 2% – now what?

Inflation in the eurozone fell to 1.9% in May 2025, dropping below the European Central Bank’s (ECB) 2% target for the first time in months.

This unexpected decline has sparked discussions about the potential consequences for the region’s economy.

The latest data from Eurostat shows that core inflation, which excludes volatile items like energy and food, also eased to 2.3%, down from 2.7% in April.

Services inflation, a key indicator of consumer demand, dropped sharply to 3.2% from 4%. These figures suggest that price pressures are cooling faster than anticipated.

While lower inflation can ease the cost of living for consumers, it also raises concerns about economic stagnation.

The ECB has been gradually cutting interest rates to support growth, and markets are now pricing in a 95% chance of another rate cut this week. However, if inflation continues to fall below target, it could signal weak demand and slow wage growth, potentially leading to deflationary risks.

Adding to the uncertainty, global trade tensions, particularly U.S. tariff policies, are clouding the economic outlook. The ECB will need to carefully balance its approach to ensure inflation remains stable while supporting economic expansion.

As policymakers prepare for their next decision, the eurozone faces a delicate challenge: maintaining price stability without stifling growth.

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OECD cuts U.S. growth forecast amid Trump’s tariff chaos

OECD U.S. data

The Organisation for Economic Co-operation and Development (OECD) has sharply downgraded its U.S. growth forecast, citing economic uncertainty and the impact of President Donald Trump’s tariff policies.

The OECD now expects the U.S. economy to expand by just 1.6% in 2025 and 1.5% in 2026, a significant cut from its previous estimate of 2.2% for 2025.

The report highlights several factors contributing to the slowdown, including elevated policy uncertainty, reduced net immigration, and a shrinking federal workforce.

The OECD also warns that higher trade barriers could further dampen business confidence and investment.

Global growth projections have also been revised downward, with the OECD stating that the slowdown is most pronounced in North America, particularly in the U.S., Canada, and Mexico.

The organisation reportedly notes that U.S. tariff-related disruptions are expected to push inflation higher, although weaker commodity prices may offset some of the impact.

The OECD’s latest outlook underscores the growing challenges facing the U.S. economy as trade tensions persist.

With tariffs fluctuating due to ongoing ‘stop start’ legal interventions, businesses and investors remain cautious about the future.

The coming months will be crucial in determining whether policymakers can stabilise growth and restore confidence in the market.

Stop the tariffs and all will be fine.

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China’s manufacturing sector experiences decline amid Tariff chaos

China factory data

China’s manufacturing activity took an unexpected hit in May 2025, marking its steepest decline since September 2022.

The Caixin/S&P Global manufacturing PMI fell to 48.3, signalling contraction for the first time in eight months. This downturn comes as U.S. tariffs begin to weigh heavily on Chinese exports, dampening global demand and disrupting supply chains.

The latest data reveals that new export orders shrank for the second consecutive month, hitting their lowest level since July 2023.

Factory output also contracted for the first time since October 2023, reflecting the broader economic slowdown. Analysts attribute this slump to the reinstatement of sweeping U.S. tariffs, which were briefly halted before being reimposed by a federal appeals court.

Despite a temporary trade truce between the U.S. and China, tensions remain high, with both sides accusing each other of violating agreements.

The uncertainty surrounding trade policies has led Chinese manufacturers to cut jobs at the fastest pace since the start of the year, further exacerbating economic concerns.

China’s Premier Li Qiang has hinted at new policy tools, including unconventional measures to stabilise the economy. However, with tariffs set to remain high and structural challenges persisting, experts predict continued pressure on China’s industrial sector.

As the world’s second-largest economy grapples with these headwinds, the coming months will be crucial in determining whether Beijing can implement effective strategies to counteract the impact of tariffs and restore manufacturing momentum.

Caixin/S&P Global manufacturing PMI survey

The report was based on the Caixin/S&P Global manufacturing PMI survey, which is a private-sector survey that tracks China’s manufacturing activity.

This survey is conducted mid-month and covers over 500 mostly export-oriented businesses, making it distinct from China’s official PMI, which samples 3,000 companies and is compiled at month-end.

The Caixin PMI tends to focus more on small and medium-sized enterprises, whereas the official PMI aligns more closely with industrial output.

In May, the Caixin PMI fell to 48.3, marking its first contraction in eight months. The decline was largely driven by shrinking new export orders, which hit their lowest level since July 2023.

The survey also showed that employment in the manufacturing sector declined at the fastest pace since January, reflecting the broader economic slowdown.

One key difference between the Caixin PMI and the official PMI is their timing. The Caixin survey is conducted earlier in the month, meaning it may not fully capture policy changes or trade developments that occur later.

For example, economists noted that the effect of the tariff de-escalation in mid-May may not have been reflected in the Caixin PMI results

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Why are investors taking up positions in short term treasury bets?

Short-term Treasury Yields

Investors are increasingly favouring short-term U.S. Treasury securities, with notable figures like Warren Buffett taking sizeable positions.

This shift is driven by concerns over economic instability, fluctuating bond yields, and government spending.

Short-term Treasuries, such as T-bills with maturities under a year, offer a safer haven compared to longer-term bonds, which are more vulnerable to interest rate changes.

As central banks navigate monetary policy adjustments, many investors prefer the flexibility of short-duration assets that minimise exposure to prolonged economic uncertainty.

One of the biggest influences in this trend is Berkshire Hathaway’s substantial stake in T-bills, which has reinforced confidence in these instruments.

Additionally, ultra-short bond ETFs like SGOV and BIL have seen significant inflows, highlighting the growing demand for liquid, low-risk investments.

Another key factor driving this strategy is concern over U.S. fiscal policy. Investors are wary of rising deficits and potential tax hikes, which could impact long-term bond stability.

By allocating funds to short-term Treasuries, they can mitigate risks while maintaining liquidity.

This surge in short-term Treasury investments reflects a broader shift in market sentiment-favouring stability and flexibility over long-term speculation.

As economic uncertainty persists, investors are likely to continue this defensive strategy.

SGOV & BIL ETFs explained

SGOV and BIL are both exchange-traded funds (ETFs) that invest in U.S. Treasury bills, offering a low-risk way to earn interest on short-term government debt.

SGOV (iShares 0-3 Month Treasury Bond ETF) tracks the ICE 0-3 Month U.S. Treasury Securities Index, investing in Treasury bonds with maturities of three months or less. It launched in 2020 and is known for its low expense ratio.

BIL (SPDR Bloomberg 1-3 Month T-Bill ETF) follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, focusing on Treasury bills with maturities between one and three months.

It has been around since 2007 and is one of the largest T-bill ETFs.

Both ETFs provide exposure to ultra-short-term government securities, making them attractive options for investors seeking stability and liquidity in uncertain markets.

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Trump’s tariffs challenged in court and deemed to be illegal

U.S. tariff court ruling

A U.S. federal court has ruled that former President Donald Trump’s sweeping tariffs were imposed illegally, dealing a significant blow to his economic policies.

The Court of International Trade determined that Trump exceeded his authority by invoking emergency powers to justify tariffs on nearly every country.

The ruling states that the U.S. Constitution grants Congress exclusive power to regulate commerce, meaning the president cannot unilaterally impose such broad trade restrictions.

The decision immediately halted the 10% tariffs Trump had imposed on most U.S. trading partners, as well as additional levies on China, Mexico, and Canada.

The court found that the International Emergency Economic Powers Act (IEEPA), which Trump cited as justification, does not grant him the authority to implement such sweeping trade measures.

The White House swiftly filed an appeal, arguing that the tariffs were necessary to address trade imbalances and safeguard American industries.

However, businesses and state governments that challenged the tariffs welcomed the ruling, citing concerns over inflation and economic harm.

Dow Jones Industrial Average Futures 28th & 29th May 2025 after the court ruling

Dow Jones Industrial Average Futures 28th & 29th May 2025 after the court ruling

Markets responded positively to the decision, with stock futures rising and the U.S. dollar strengthening. If the ruling stands, businesses that paid the tariffs may be eligible for refunds, marking a potential shift in U.S. trade policy.

The U.S. President is expected to find a workaround after suffering a major blow to a core part of his economic agenda.