Category: Economoney

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China’s Exports Defy Tariff Pressures, Surge 8.1% in April

China World Trade

Despite the weight of U.S. tariffs imposed by President Donald Trump, China’s export sector has shown remarkable resilience, posting an 8.1% increase in April 2025 compared to the previous year.

This surge comes as a surprise, surpassing economists’ expectations of a modest 1.9% rise.

While China’s outbound shipments to the U.S. plunged by over 21%, exports to Southeast Asian nations soared by 20.8%, with Indonesia and Thailand seeing particularly strong growth.

This shift suggests that Chinese exporters are successfully redirecting their goods to alternative markets, mitigating the impact of U.S. trade restrictions.

The tariffs, which now stand at 145% on Chinese imports, were designed to pressure Beijing into trade concessions. In response, China retaliated with 125% duties on American goods, further escalating tensions.

However, analysts suggest that some of China’s export growth may be attributed to transshipment through third countries and contracts signed before the tariffs took effect.

Despite the export boom, China’s factory activity has taken a hit, falling to a 16-month low in April 2025, with new export orders dropping to their lowest level since December 2022.

Concerns are mounting that the tariffs could spill over into the job market, with estimates suggesting China could lose 16 million jobs tied to U.S. – bound production.

As both nations prepare for high-level trade talks in Switzerland, there is cautious optimism that a phased rollback of tariffs could be on the horizon.

While a comprehensive deal remains elusive, even minor tariff reductions could provide relief to businesses on both sides.

The coming months will be crucial in determining whether China can sustain its export momentum or if the tariff war will take a deeper toll on its economy.

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Bank of England cuts interest rates by 0.25% to 4.25%

BoE

The Bank of England has cut interest rates by 25 basis points to 4.25% on 8th May 2025 marking its fourth reduction since August 2023.

The decision, backed by a majority of the Monetary Policy Committee, reflects easing inflation pressures and a need to support economic growth.

Inflation, currently at 2.6%, is expected to rise temporarily to 3.5% due to household bill increases.

The cut will provide relief to homeowners and businesses facing high borrowing costs.

However, policymakers remain cautious, balancing growth stimulation with inflation control. Markets anticipate further cuts, potentially bringing rates down to 3.25% by year-end.

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U.S. Federal Reserve holds interest rates at 4.25% – 4.50% and upsets Trump in the process

Tariffs and the U.S. economy?

The Federal Reserve held its key interest rate steady at 4.25% – 4.50% on 7th May 2025, citing economic uncertainty and the potential impact of tariffs.

Fed Chair Jerome Powell emphasised that the central bank is in wait-and-see mode, monitoring inflation and employment risks.

The decision follows concerns that Trump’s trade policies could lead to stagflation, with rising prices and slowing growth.

While markets reacted positively, analysts remain divided on whether the Fed will cut rates later this year.

Powell stated that future adjustments will depend on evolving economic conditions and the balance of risks.

Trump’s take on this decision was reportedly to call Powell… a fool.

What is stagflation?

Stagflation is an economic condition where high inflation, stagnant economic growth, and high unemployment occur simultaneously.

It presents a challenge for policymakers because measures to reduce inflation can worsen unemployment, while efforts to boost growth may fuel inflation further.

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Signs of weakness in the U.S. economy – is a recession coming and is the United States causing harm to global economies?

Cracking world economies

The U.S. economy is showing cracks as multiple indicators suggest that growth may be slowing.

With GDP shrinking by 0.3% in the first quarter of 2025, concerns about an impending recession have intensified among analysts and investors.

A key driver of this economic downturn is the ongoing trade uncertainty, which has prompted businesses to stock up on imports before new tariffs take effect.

While some experts argue this is a temporary setback, others caution that prolonged trade conflicts could stifle growth for months to come.

Resilient labour market

Despite these concerns, the labour market has remained resilient, with unemployment hovering at 4.2%. However, signs of strain are emerging – job openings have declined, and layoffs have picked up in certain industries.

If hiring slows further, consumer spending could weaken, adding pressure to the economy.

Inflation remains another point of concern. Rising costs of goods and services have strained household budgets, leading to reduced discretionary spending.

The Federal Reserve, which has maintained high interest rates, is carefully assessing whether policy adjustments are needed to prevent a sharper downturn.

On Wall Street, sentiment is divided. Goldman Sachs estimates a 45% probability of a recession, while J P Morgan suggests the likelihood could be as high as 60%.

Some economists believe strategic trade deals and government intervention could avert a full-blown recession, but the margin for error is slim.

Does it really matter if there is to be a recession – it will likely be short lived. It will not please the U.S. President Donald Trump.

While uncertainty clouds the future, one thing is clear – the U.S. economy is at a pivotal moment. Whether policymakers can stabilise growth or if the nation is headed towards a deeper slowdown will depend on the next few quarters and the outcome of Trump’s tariffs.

Tudor Investment Corporation

Paul Tudor Jones, the founder of Tudor Investment Corporation, recently shared his outlook on the U.S. economy, and his perspective isn’t exactly optimistic.

He believes that U.S. stocks are likely to hit new lows before the end of the year, even if President Trump dials back tariffs on Chinese imports.

Jones pointed out that the combination of high tariffs and the Federal Reserve’s reluctance to cut interest rates is putting significant pressure on the stock market.

He reportedly noted that even if Trump reduced tariffs to 50% or 40%, it would still amount to one of the largest tax increases since the 1960s, potentially slowing economic growth.

The billionaire investor also warned that unless the Fed adopts a more dovish stance and aggressively cuts rates, the market is likely to continue its downward trajectory.

He reportedly emphasised that the current economic conditions – marked by trade uncertainty and tight monetary policy – are not favourable for a stock market recovery.

Interestingly, Jones also expressed concerns about artificial intelligence, stating that AI poses an imminent threat to humanity within our lifetime.

Maybe AI will start running hedge funds too…?

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FTSE 100 achieves longest unbroken run since inception in 1984 – how significant is this record?

Longest FTSE 100 consecutive daily gains since 1984

The FTSE 100 has made history, recording 15 consecutive days of gains—its longest winning streak since its inception in 1984.

The index closed at 8,596.35 points, marking a 1.17% rise on the final day of the streak.

This remarkable run comes amid the potential of easing trade tensions between the U.S. and China, with signs that tariff negotiations may commence.

Investors have responded positively, driving up stock prices across multiple sectors. Financial stocks, including Barclays and HSBC, have surged following strong earnings reports, while industrial and mining stocks – such as Rolls-Royce and Rio Tinto – have rebounded.

Despite the impressive streak, analysts caution that uncertainty remains. The FTSE 100 has yet to reclaim its record high from March 2025, and concerns over global trade policies could limit further gains.

However, the index has still outperformed expectations, rising 4.9% over six months and 5.1% over the past year.

FTSE 100 one-month chart

FTSE 100 one-month chart

As investors celebrate this milestone, the question remains: can the FTSE 100 sustain its momentum, or is a market correction on the horizon?

Either way, this winning streak has cemented its place in financial history.

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U.S. Economy Contracts in Q1 2025 Amid Trade Policy Uncertainty

U.S. GDP

The U.S. economy shrank by 0.3% in the first quarter of 2025, marking the first contraction since early 2022.

The decline was largely driven by a surge in imports, which soared 41.3%, as businesses rushed to stockpile goods ahead of President Donald Trump’s newly imposed tariffs. Imports subtract from GDP calculations, contributing to the negative growth figure.

Despite the contraction, consumer spending remained positive, increasing 1.8%, though at a slower pace than previous quarters. Private domestic investment also saw a sharp rise of 21.9%, fueled by a 22.5% increase in equipment spending, likely influenced by tariff concerns.

The Federal Reserve faces a complex decision ahead of its upcoming policy meeting. While the negative GDP growth may push the central bank toward interest rate cuts, inflation remains a concern, with the U.S. Personal Consumption Expenditures (PCE) price index rising 3.6% for the quarter.

Markets reacted cautiously, with stock futures slipping and Treasury yields climbing. As the Trump administration navigates trade negotiations, economists warn that continued uncertainty could weigh on future growth prospects.

Next up, U.S. employment data.

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Shock but no ‘awe’ in Trump’s first 100 days in office

Sledgehammer policies

U.S. President Donald Trump has definitely brought a lot of shock in the first 100 days of his presidency, smashing trade links, alliances, and even his own government, but it can hardly be said to have left anybody truly in ‘awe’.

Donald Trump’s first 100 days in office during his second term have been a whirlwind of activity, marked by bold moves and significant controversy.

His poll rating is the lowest of any President of recent times for the first 100 days. It currently sits at around 41% (a CNN poll result suggests).

How does it compare?

Harry S. Truman, hit a rock-bottom approval rating of 22% in 1952. Other presidents like Richard Nixon and George W. Bush also dipped below 25%. But these were during their terms and not in the first 100 days.

His administration has focused heavily on reshaping trade policies, imposing tariffs that have disrupted global markets and strained relationships with long-standing allies.

Despite his claims of progress, no major trade deals have been finalised, leaving many questioning the effectiveness of his approach.

Legal challenges

Domestically, Trump’s policies have faced significant legal challenges, with numerous lawsuits filed against his administration. His stance on immigration and energy has sparked heated debates, reflecting the polarising nature of his decisions.

Trump’s ‘drill-baby-drill’ mantra has not had the desire reaction – oil prices has fallen with U.S. oil below $65 a barrel.

The automotive industry, for instance, has grappled with regulatory uncertainty and additional costs due to his tariffs, prompting him to soften some measures in response to industry concerns.

Internationally, Trump’s actions have raised concerns about U.S. credibility and stability. His hostile stance toward traditional allies, such as Canada, the EU and NATO, has left multi-decade relationships in tatters.

Meanwhile, his administration’s handling of the ongoing war in Ukraine and trade negotiations with China has drawn criticism for its lack of tangible results.

Despite these challenges, Trump remains confident in his vision for America. He has claimed progress in tariff negotiations with India, suggesting that a trade deal may be on the horizon.

No deals… yet

There has not been a single trade deal concluded with Trump’s administration – despite him reportedly claiming to have done ‘200 deals’ with only 195 countries in the world.

China is still striking a defiant tone on trade, and the war in Ukraine rages on. The president has also been forced to walk back on his “reciprocal tariffs.” 

However, his administration’s approach has left many wondering whether his first 100 days will be remembered for their impact or their controversy.

As the dust settles, the world watches closely to see how Trump’s policies will shape the future of the United States and its role on the global stage.

Trump may have wanted his first 100 days to be historic, and they were – but for all the wrong reasons.  

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Countries begin to turn away from the U.S. because of Trump’s tariff policies

U.S. tariffs crate uncertainty

Countries are increasingly pivoting away from the United States due to the ripple effects of former President Donald Trump’s tariff policies.

His ‘America First’ ideology, which prioritised domestic interests over international collaboration, assumed that the world needed America more than America needed the world. While this may have held true in certain aspects, the global response suggests otherwise.

Southeast Asian nations, heavily impacted by Trump’s tariffs, have begun strengthening intra-regional trade and diversifying their export destinations.

This shift reflects a growing desire to reduce reliance on the U.S. economy and mitigate the risks associated with its unpredictable trade policies.

Similarly, China, facing significant challenges from the U.S.-China trade war, has ramped up fiscal stimulus and expanded its markets beyond American borders. These moves highlight a strategic effort to counteract the economic pressures imposed by U.S. tariffs.

China has also introduced employment support and hinted at more stimulus as U.S. created trade war tension escalates.

The U.S. has increasingly found itself playing catch-up in critical areas like rare earth elements and minerals. The original U.S. tariff scope has already been adjusted and rolled back.

The 90-day tariff pause being one of them and the reduction of tech related tariffs another.

Trump’s recent executive order to jump-start deep-sea mining underscores America’s attempt to secure access to these strategically important resources, which China currently dominates.

However, this reactive approach may not be enough to recover from the damage already done and to regain lost ground may prove even harder still.

The unintended consequence of Trump’s policies is a more fragmented global trade landscape. Countries are taking measures to strengthen their own economies and reduce dependence on the U.S., potentially leaving America isolated in certain aspects of international affairs.

While the U.S. remains a major player in global trade, its unilateral actions have prompted other nations to explore alternative paths, reshaping the dynamics of global commerce.

This shift serves as a reminder that in an interconnected world, cooperation often yields better outcomes than isolationist policies.

The long-term implications of these changes are yet to fully unfold, but they signal a significant transformation in the global economic order.

Will the U.S. be the loser – or will it become even stronger in the world order?

It was already the world’s number one economy!

It’s not easy to unravel 100’s of years of interconnected world trade.

Why?

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EU reduces interest rate to 2.25%

EU reduces interest rate

The European Central Bank (ECB) announced its seventh consecutive interest rate cut on Thursday 17th April 2025, lowering the rate by 0.25% to 2.25%.

This decision aims to counter economic growth concerns fueled by global trade tensions, particularly the impact of tariffs imposed by the United States.

The ECB’s move is expected to make borrowing more affordable, supporting consumer spending and business investment.

Inflation in the eurozone has fallen to 2.2%, close to the ECB’s target, shifting the focus to growth worries.

The eurozone economy grew by a modest 0.2% in the last quarter of 2024, highlighting the need for measures to stimulate activity.

The ECB’s decision reflects the challenges posed by trade uncertainties and the potential impact of tariffs on European industries.

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No tariffs for Russia?

Russia escapes Trumps tariffs

Russia’s exemption from recent U.S. tariffs has sparked curiosity and debate. While many nations face new trade duties, Russia remains notably absent from the list

This decision stems from a combination of geopolitical, economic, and strategic factors.

One key reason is the existing sanctions imposed on Russia by several countries, including the United States, following its invasion of Ukraine in 2022.

These sanctions have already significantly curtailed trade between Russia and its global partners, rendering additional tariffs less impactful.

For instance, U.S.-Russia trade has dwindled to a fraction of its pre-war levels, focusing primarily on strategic goods like fertilisers and chemicals.

Another factor is the ongoing diplomatic efforts to address the conflict in Ukraine. Some analysts suggest that exempting Russia from tariffs could be a strategic move to maintain a channel for negotiation and potential cooperation.

This approach might aim to encourage Russia’s participation in peace talks or other diplomatic initiatives.

Additionally, the structure of Russia’s exports plays a role. Certain goods, such as fertilisers, are critical to global supply chains, and imposing tariffs could disrupt markets and harm economies reliant on these imports.

While the decision has drawn criticism, it underscores the complexities of balancing economic policies with geopolitical realities.

The debate continues as the global community navigates these challenging dynamics caused through the imposition of U.S. tariffs.

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UK economy shows welcome signs of resilience with positive GDP growth and inflation relief

Union Jack flag and stocks charts

The UK economy displayed unexpected resilience in February 2025, with GDP growing by 0.5%.

This figure has exceeded market expectations and provided a welcome boost to UK economic confidence. The growth was fueled by robust activity in the services and manufacturing sectors, which helped counterbalance ongoing challenges in other areas.

February’s performance marks a recovery from the flat growth seen in January 2025, underscoring the adaptive capacity of businesses and consumers alike.

Adding to the positive momentum, the Consumer Prices Index (CPI) inflation rate eased to 2.6% in March 2025, down from February’s 2.8%.

The decline in inflation reflects a combination of factors, including falling fuel costs and stable food prices, which have alleviated pressure on household budgets.

This marks the lowest inflation level since late 2024 and aligns with the Bank of England’s goal of achieving price stability.

The interplay of stronger-than-expected GDP growth and easing inflation suggests a cautiously optimistic outlook for the UK economy.

While challenges persist, such as global economic uncertainties and lingering effects of Brexit, these latest figures indicate a potential turning point, despite the Chancellors autumn and spring ‘budgets’.

The UK government and market participants will be watching closely to see if this positive trend continues into the coming months.

See: Office for National Statistics (ONS)

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Tech stocks propel market rally amid Trump’s tariff pause

Stocks move back up

On Monday 14th April 2025, the stock market experienced a notable mini rally, driven by the tech sector’s resurgence following a weekend announcement of a temporary tariff pause.

President Trump’s decision to exempt smartphones, computers, and other electronics from steep tariffs provided a much-needed reprieve for the industry, sparking optimism among investors.

Major tech companies like Apple, Nvidia, and Amazon saw significant gains, with Apple shares surging by 7.5%. The Nasdaq Composite, heavily weighted with tech stocks, climbed 1.9%, while the S&P 500 rose 1.5%.

This rally marked a stark contrast to the volatility of the previous week, where tariff uncertainties had sent shockwaves through the market.

The tariff pause, although temporary and restricted to 20%, helped to alleviate immediate concerns about rising costs for consumers and businesses.

Importers were spared from choosing between absorbing higher expenses or passing them on to customers. This relief was particularly impactful for companies reliant on Chinese manufacturing, as the exemptions covered a wide range of tech products.

Market analysts noted that the rally was not just a reaction to the tariff news but also a reflection of the tech sector’s resilience.

Despite facing challenges earlier in the year, tech companies have continued to innovate and adapt, maintaining their position as a driving force in the U.S. and world economies.

However, the rally’s sustainability remains uncertain. The administration’s mixed messages about future tariffs have left investors cautious.

While Monday’s gains were encouraging, the broader market continues to grapple with the unpredictability of trade policies.

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Trump takes wrecking ball to global trade – sets stock markets on fire and plays golf – all in one week

Reckless tariffs

Is this a fair ‘take’ on the last weeks tariff turmoil?

President Trump’s tariffs have left a significant mark on global trade and financial markets, creating waves that continue to shape global economic dynamics.

The tariffs, initially aimed at reducing the U.S. trade deficit and protecting domestic industries, triggered a rollercoaster ride for stock markets and strained international relations.

Highs to lows

The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 experienced sharp declines following the announcement of sweeping tariffs. At their lowest points, the Dow fell to 37226, the Nasdaq dropped to 15266, and the S&P 500 sank to 4956.

These figures marked significant losses, with trillions of dollars wiped off the market in just a few days.

The volatility was exacerbated by fears of a global trade war and the uncertainty surrounding the tariffs’ implementation.

Tariff turmoil and 90 day pause

In response to the market turmoil, President Trump announced a 90-day pause on most tariffs, providing temporary relief to investors and businesses. This decision led to a rebound in stock markets, with indices recovering some of their losses.

However, the relief was short-lived, as tensions with China escalated. While tariffs on many trading partners were paused, China’s tariff rate was increased to a staggering 125%.

This move further strained U.S.-China relations and added pressure on industries reliant on Chinese imports.

Tech garners favour

The tech sector, heavily dependent on global supply chains, was among the hardest hit. Tariffs on components like microchips and finished products such as smartphones and computers disrupted production and increased costs.

Companies faced challenges in maintaining profitability and passing on the increased costs to consumers. The eventual reduction and cancellation of some tariffs provided a lifeline to the tech industry, allowing businesses to stabilize operations and reduce prices.

However, the uncertainty surrounding trade policies continued to pose challenges for the sector.

Market turmoil?

Was this the ultimate in market ‘management’ as President Trump posted on his social media platform, Truth Social, that it was a ‘great time to buy’ just hours before announcing the 90-day tariff pause.?

This statement, made at 9:37 am., came shortly before the announcement, which caused stock markets to surge significantly. The timing of his post raised eyebrows and sparked discussions about potential insider trading concerns

China retaliates

China’s response to the tariffs was swift and retaliatory. Beijing imposed its own tariffs on U.S. imports, raising rates to 125%. This retaliation targeted key U.S. industries, including agriculture and technology, further escalating the trade conflict.

The Chinese yuan also hit its lowest level against the dollar since the global financial crisis. These measures highlighted the deepening economic rift between the world’s two largest economies.

The effects of President Trump’s tariffs underscore the complexities of modern trade policies. While intended to protect domestic industries, the tariffs created significant economic disruptions, both domestically and globally.

The stock market volatility, strained international relations, and challenges faced by industries like technology illustrate the far-reaching consequences of such policies.

As the world continues to navigate the aftermath of these tariffs, the importance of balanced and strategic trade policies becomes increasingly evident.

Markets moved up, unsurprisingly, after Trump announced the tech tariff adjustment

Over the weekend, President Trump reportedly made several statements about tariffs on tech products, creating some confusion.

Initially, it was announced that smartphones, computers, and other electronics would be temporarily excluded from the steep tariffs.

However, Trump later clarified that these products were not entirely exempt but had been moved to a different ‘tariff bucket.’ He reportedly stated that they would still face a 20% tariff as part of broader measures targeting Chinese goods.

Trump also hinted at upcoming tariffs on semiconductors and the entire electronics supply chain, emphasising the need for the U.S. to produce more of these components domestically.

President Trump reportedly described this as part of a ‘National Security Tariff Investigation’. These announcements have left tech companies and investors uncertain about the long-term implications for the industry.

Tariffs are like a spider’s web cast over the world with the spider, crawling around collecting from its prey.

Trump’s tariffs continue to ‘infect’ world trade, and they will be here for a while yet.

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The end of globalisation or a fresh start with a new world order?

Global trade

Globalisation is a process that has woven the world together, creating interconnected networks of trade, culture, technology, and governance.

At its core, globalisation refers to the increased interaction and integration between people, companies, and governments across the globe.

This phenomenon has profound economic, political, and cultural implications, shaping the way we live and think.

Historically speaking

Historically, globalisation is not a recent occurrence; it has been evolving for centuries. The roots of globalisation can be traced back to ancient civilizations when trade routes like the Silk Road emerged around 130 BCE during the Han Dynasty of China.

The Silk Road connected Asia, the Middle East, Europe, and North Africa, facilitating the exchange of goods, ideas, religions, and innovations. While it was primarily a trade route, it also marked the first notable instances of cross-cultural interaction on a global scale.

However, the modern wave of globalisation began much later. Many historians point to the Age of Exploration in the late 15th and early 16th centuries as a pivotal moment.

European explorers like Christopher Columbus and Vasco da Gama sought new trade routes to Asia and the Americas, leading to the establishment of colonial empires.

These explorations were driven by ambitions of trade, wealth, and power, further intertwining economies and cultures.

Adam Smith, the 18th-century economist and philosopher, can also be credited with significantly influencing globalisation through his ideas. His seminal work, The Wealth of Nations (1776), laid the foundation for modern economics and advocated for free-market trade.

His philosophies supported the idea of open international markets, which became a cornerstone of globalisation in later years.

Industrial revolution

Fast forward to the 19th and 20th centuries, the Industrial Revolution and advancements in technology supercharged globalisation.

Railroads, steamships, telegraphs, and later airplanes and the internet, reduced distances and enhanced global connectivity.

This period also saw the establishment of international organisations such as the United Nations and the World Trade Organisation, further embedding globalisation into global policies.

Evolution

Today, globalisation continues to evolve. While it has brought unparalleled access to goods, services, and information, it has also sparked debates about its impact on inequality, environmental sustainability, and cultural homogenisation.

As nations and individuals grapple with its implications, globalisation remains a defining characteristic of our interconnected world. Its history is a testament to humanity’s constant quest to connect, collaborate, and innovate.

Tariffs

The introduction of ‘protectionist’ policies and ideals will likely lead back to globalisation in the end. Are Trump’s protectionist tariff ideals about protectionism or more about a drive to level the imbalance of global trade differences? Gobal trade will not end!

The tariffs are more about aiming to settle trade imbalances, at least according to U.S. President Trump.

Trump’s tariffs have had a significant impact on globalisation, challenging its trajectory. By imposing sweeping tariffs on imports, including a baseline 10% on goods from various countries, Trump aimed to reduce the U.S. trade deficit and reshore U.S. manufacturing.

While this approach sought to protect domestic industries, it disrupted global trade networks and raised concerns about inflation and economic instability.

These tariffs marked a shift away from decades of free trade policies that had fostered globalisation. Critics argue that such measures could lead to higher consumer prices and strained international relations.

On the other hand, proponents believe they might encourage self-reliance and industrial growth within the U.S.

The long-term effects on globalisation remain uncertain. While some see this as a step toward de-globalisation, others view it as a recalibration of trade dynamics.

The future will likely depend on how nations adapt to these changes and whether they seek collaboration or confrontation in global trade.

Globalisation is too big for it to simply… stop!

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China to impose 34% retaliatory tariff on all goods imported from the U.S.

Trade war

China has reportedly announced a significant escalation in its trade dispute with the United States, declaring a 34% retaliatory tariff on all U.S. goods.

This move, set to take effect on 10th April 2025 and comes in response to the sweeping tariffs imposed by President Donald Trump’s administration earlier this week.

The Chinese Ministry of Finance reportedly stated that these measures are aimed at safeguarding China’s economic interests and countering what it describes as ‘unilateral bullying’ by the U.S. government.

The tariffs will apply across a wide range of American exports, potentially impacting industries such as agriculture, technology, and manufacturing.

This development has heightened global market uncertainty, with investors bracing for further economic disruptions.

The ongoing tit-for-tat measures between the two economic giants underscore the fragility of international trade relations in the current climate.

Markets dropped on the news!

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Dow dives 1600 points after Trump’s tariff attack – S&P 500 and Nasdaq drop the most since 2020

Stocks markets fall

The U.S. stock market experienced a dramatic plunge following President Donald Trump’s announcement of sweeping tariffs, marking one of the most significant market downturns since 2020.

On 3rd April 2025, the Dow Jones Industrial Average plummeted by 1,600 points, a staggering 4% drop, closing at 40,546.

Dow Jones one day chart

The S&P 500 fell by 4.8%, while the tech-heavy Nasdaq Composite suffered a 6% decline, reflecting widespread investor anxiety.

S&P 500 one day chart

Trump’s tariffs, which include a baseline 10% levy on imports from all trading partners and higher rates for specific countries, have sparked fears of a global trade war.

The effective tariff rate for China, for instance, has risen to 54%, raising concerns about supply chain disruptions and inflation. Major industries, including technology, retail, and manufacturing, were hit hard.

Apple shares dropped nearly 10%, while companies like Nike and Nvidia saw significant losses.

Apple one day chart

The market reaction underscores the uncertainty surrounding the economic impact of these tariffs. Analysts warn that the measures could dampen consumer spending, increase inflation, and slow economic growth.

The ripple effects were felt globally, with European and Asian markets also experiencing declines. The Nikkei index declined a further 3%.

Nikkei Index five-day chart

Despite the turmoil, Trump defended the tariffs, likening them to a necessary ‘operation’ for the economy. He expressed confidence that the markets would eventually rebound, emphasising the long-term benefits of reshoring manufacturing and generating federal revenue.

As investors grapple with the implications of these policies, the focus remains on potential retaliatory measures from affected countries and the broader impact on global trade dynamics.

The sharp market sell-off serves as a stark reminder of the delicate balance between protectionist policies and economic stability in an interconnected world.

The coming weeks will be crucial in determining whether these tariffs lead to lasting economic shifts or temporary market volatility.

U.S. companies are experiencing more harm from Trump’s tariffs. He wants manufacturing to come back to America – but after decades of globalization fine tuning – that is no easy task.

Are markets underestimating the impact of the tariffs on inflation?

Are markets pricing in the fact that Trump’s tariff policy will not be fully followed through?

The U.S. would be lucky to see a single rate cut from the Federal Reserve this year – and that will unsettle investors.

The U.S. economy could now only expand by between 1% and 1.5% this year – this would be a significant change in the growth outlook when compared with the International Monetary Fund’s (IMF) projection of 2.7% U.S. growth made earlier this year.

If we get close to 1%, we get close to ‘stall’ speed and then it could just stop – and that will mean recession or worse for the U.S.

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Dow closed 700 points lower Friday 28th March 2025 as inflation and tariff fears worsen

Dow down

Stocks sold off sharply on Friday 28th March 2025, pressured by growing uncertainty on U.S. trade policy as well as a grim outlook on inflation

The Dow Jones Industrial Average closed down 715 points at 41,583. The S&P 500 lost 1.97% to close 5,580 ending the week down for the fifth time in the last six weeks. The Nasdaq Composite plunged 2.7% to 17,322.

Shares of several technology giants also fell putting pressure on the broader market. Google-parent Alphabet lost 4.9%, while Meta and Amazon each shed 4.3%.

This week, the S&P 500 lost 1.53%, while the 30-stock Dow shed 0.96%. The Nasdaq declined by 2.59%. With this latest losing week, Nasdaq is now on pace for a more than 8% monthly decline, which would be its worst monthly performance since December 2022.

Dow Jones one-day chart (28th March 2025)

Dow Jones one-day chart (28th March 2025)

Stocks took a leg lower on Friday after the University of Michigan’s final read on consumer sentiment for March 2025 reflected the highest long-term inflation expectation since 1993.

Friday’s core personal consumption expenditures price index also came in hotter-than-expected, rising 2.8% in February and reflecting a 0.4% increase for the month, stoking concerns about persistent inflation.

Economists had reportedly been looking for respective numbers of 2.7% and 0.3%. Consumer spending accelerated 0.4% for the month, below the 0.5% forecast, according to fresh data from the Bureau of Economic Analysis.

The market is getting squeezed by both sides. There is uncertainty about reciprocal tariffs hitting the major exporting sectors like tech alongside concerns about a weakening consumer facing higher prices

Trump’s tariffs push will hit the U.S. harder than Europe in the short term, it has been reported.

Japan’s Nikkei enters correction as Trump’s tariff assault drives sell-off in Asia markets

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Core U.S. inflation in February hits 2.8% – higher than expected

U.S. inflation

The core personal consumption expenditures price index, a key Fed inflation measure was up 0.4% in February 2025, putting the 12-month inflation rate at 2.8%

Consumer spending accelerated 0.4% for the month, below the 0.5% forecast, but personal income posted a 0.8% rise, against the estimate for 0.4%.

If we were to combine these higher inflation figures with Trump’s tariffs and the unrest Trump is creating around the world and of the tensions with Russia and China – it doesn’t bode well for the future!

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Trump announces 25% tariffs on car imports to U.S. and pledges pharma tariffs to come

Trump's Tariffs

Trump’s tariffs have been a cornerstone of his trade policy, aimed at protecting American industries and reducing trade deficits

These measures include tariffs on steel, aluminum, and a wide range of goods from countries like China, Canada, and the European Union.

While supporters argue that these tariffs have bolstered domestic manufacturing and created jobs, critics highlight the retaliatory tariffs imposed by other nations, which have affected American exporters.

President Donald Trump said he will soon announce tariffs targeting automobiles and pharmaceuticals.

Trump later added the timber and semiconductor industries to his list.

It was unclear whether the newly announced sector-specific tariffs would take effect after the tit-for-tat ‘reciprocal tariffs’ – which are set to take effect on for 2nd April 2025

The president’s latest comments at a Cabinet meeting came hours after he unveiled a plan to place 25% tariffs on all countries that buy oil and gas from Venezuela.

Trump’s tariffs have had widespread economic effects, both domestically and globally

Higher Prices for Consumers

Tariffs increase the cost of imported goods, which often leads to higher prices for consumers. This can reduce purchasing power and affect living standards.

Impact on Businesses

Companies relying on imported materials face higher production costs due to tariffs. Some businesses may pass these costs onto consumers, while others might struggle to remain competitive.

Retaliatory Measures

Countries affected by U.S. tariffs often impose their own tariffs on American goods. This can hurt U.S. exporters and lead to trade wars.

Economic Growth

Studies suggest that tariffs can reduce GDP growth. For example, the U.S. GDP has been estimated to decrease by 0.4% due to these measures.

Employment

While tariffs aim to protect domestic jobs, they can also lead to job losses in industries affected by higher input costs or reduced export opportunities.

Global Trade Dynamics

Tariffs disrupt international trade relationships, leading to uncertainty and reduced investment in affected sectors.

These measures have sparked retaliatory tariffs from other countries, creating a complex web of trade disputes further sowing chaos and unrest.

Markets have reacted negatively to Trumps tariffs.

One thing is certain regarding the imposition of Trump’s tariffs – consumers suffer!

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Fallout from Trump’s self-imposed tariffs and DOGE cuts is visibly damaging the U.S.

DOGE and U.S. Tariffs

The economic impact of tariffs and budget cuts by the Department of Government Efficiency (DOGE) is becoming increasingly evident

Major corporations like Nike and Accenture, for example have recently reported significant challenges stemming from these policies. Nike has warned of a sharp decline in sales for the current quarter, attributing this to tariffs and weakened consumer sentiment.

Similarly, Accenture has experienced a reduction in revenue due to cuts in U.S. government contracts, highlighting the ripple effects of reduced federal spending. It is a good guide to U.S. consumer sentiment.

The tariffs, part of a broader economic strategy, aim to protect domestic industries but have led to higher production costs and strained international trade relations.

The European Union has postponed its own tariffs on U.S. goods, seeking to negotiate a more favourable agreement and mitigate potential economic fallout.

These developments underscore the delicate balance between protecting domestic interests and maintaining a respectable global economic position.

Some argue that the U.S. tariffs and budget cuts may ultimately harm both businesses and consumers, as higher costs are passed down the supply chain.

As the 2nd April 2025 implementation date for new tariffs approaches, businesses and policymakers alike face mounting pressure to address these challenges and find solutions that support economic growth while minimizing adverse effects.

The coming months will be crucial in determining the long-term impact of these policies.

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UK government borrowing higher than expected in February 2025

UK borrowing up!

In February 2025, UK government borrowing reached £10.7 billion, significantly exceeding the £6.5 billion forecast by the Office for Budget Responsibility (OBR)

This marks the fourth-highest borrowing figure for February since records began in 1993. The unexpected rise in borrowing has intensified pressure on Chancellor Rachel Reeves ahead of her upcoming Spring Statement.

The increase in borrowing is attributed to higher public sector spending, which totaled £93 billion for the month, driven by social benefits and investment expenditures.

Meanwhile, government receipts, primarily from taxes, rose to £87.7 billion but failed to offset the spending surge.

Over the financial year to date, borrowing has climbed to £132.2 billion, surpassing the OBR’s earlier projection of £127.5 billion for the entire fiscal year.

Economists warn that the higher-than-expected borrowing could challenge the Chancellor’s fiscal rules, which aim to reduce debt as a share of GDP by 2029/30.

With limited options, Reeves faces tough decisions, including potential spending cuts and tax adjustments, to maintain fiscal discipline.

The borrowing figures underscore the delicate balance between managing public finances and addressing economic pressures.

As the Spring Statement approaches, all eyes are on the Chancellor’s strategy to navigate these challenges while maintaining economic stability.

The Chancellor has allowed herself to be backed into a corner.

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Japan’s inflation up 3% in February 2025 – interest rates expected to rise

Japan inflation

Japan’s core inflation rate rose to 3% in February, exceeding market expectations of 2.9%

This marks the 35th consecutive month that inflation has remained above the Bank of Japan’s 2% target.

While the figure is slightly lower than January’s 3.2%, it reflects persistent price pressures, driven by rising food and wage costs. Government subsidies for fuel helped ease the overall inflation rate to 3.7%, down from January’s 4%.

The Bank of Japan has maintained its interest rate at 0.5%, but the data strengthens the case for potential rate hikes in the coming months as inflationary trends continue to challenge households.

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Bank of England holds interest rate at 4.5%

UK interest rate

The Bank of England (BoE) has decided to maintain its base interest rate at 4.5%, following its latest Monetary Policy Committee (MPC) meeting

The Bank of England has warned economic and global trade uncertainty has ‘intensified’ as it held UK interest rates at 4.5%.

This decision, supported by eight out of nine committee members, reflects the Bank’s cautious approach amidst ongoing economic challenges.

The move comes as inflation remains above the Bank’s 2% target, with the UK Consumer Prices Index (CPI) inflation recorded at 3% in January 2025. Rising energy costs, water bills, and transportation fares have contributed to the persistent inflationary pressures.

Despite these challenges, the UK economy has shown mixed signals, with a slight GDP growth of 0.1% in the final quarter of 2024, followed by a contraction of 0.1% in January 2025.

The BoE’s decision to hold rates steady aims to balance the need to control inflation while supporting economic stability. Governor Andrew Bailey reportedly emphasised the importance of monitoring both global and domestic economic developments closely (that’s useful then – what a good idea).

The MPC’s cautious stance reflects concerns over global trade uncertainties and the potential impact of geopolitical tensions.

While the decision provides some relief to borrowers, it leaves savers and businesses navigating a landscape of economic uncertainty.

Analysts predict that the Bank of England may consider rate cuts later in the year, depending on inflation trends and economic performance.

For now, however, the focus remains on maintaining stability in a forever fast challenging environment.

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U.S. holds interest rate steady despite Trumps tariff threats – transitory inflation is back – remember that?

U.S. Interest rate

The Federal Reserve has opted to maintain its federal funds rate within the range of 4.25% to 4.5%, a decision that aligned with market expectations

This comes amidst increasing uncertainty surrounding the economic landscape. While the Fed’s current stance is to hold interest rates steady, it has reiterated its intention to implement two rate cuts later this year – a prospect that has garnered significant attention and appreciation from investors.

Fed Chair Jerome Powell reportedly expressed measured optimism about the state of the U.S. economy during his press conference.

He highlighted the strength of labour markets, and the progress made toward reducing inflation, which, although still above the 2% target, has shown improvement.

Powell also addressed potential short-term impacts of tariffs but downplayed their long-term influence on inflation.

Financial markets responded positively to the announcement, with major stock indices such as the Dow, S&P 500, and Nasdaq rallying after the recent slump.

This reflects investor confidence in the Fed’s ability to navigate economic challenges while supporting growth. However, economists warn of potential risks, including stagflation, as uncertainties tied to Trump’s tariffs and consumer spending persist.

The decision underscores the Fed’s balancing act between fostering economic stability and addressing inflationary pressures, leaving room for cautious optimism as the year unfolds.

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UK economy unexpectedly shrank by 0.1% in January 2025

UK economy shrinks

The UK economy faced an unexpected contraction of 0.1% in January, marking a surprising downturn following a 0.4% growth in December 2024

This decline, reported by the Office for National Statistics (ONS), has raised concerns about the nation’s economic trajectory, particularly as the government prioritizes boosting growth.

The contraction was primarily attributed to a slowdown in manufacturing, alongside weak performances in oil and gas extraction and construction.

The ONS noted that while the economy shrank in January 2025, the broader three-month period still showed modest growth of 0.2%. But never-the-less, it remains one of weak growth.

Interestingly, the services sector provided a glimmer of hope, driven by robust retail activity, especially in food stores, as consumers opted to eat and drink at home more frequently. This sector’s resilience partially offset the declines in other areas.

The timing of this economic dip is particularly significant, as it precedes the Chancellor’s Spring Statement, where even more government spending cuts are expected to be outlined.

Chancellor Rachel Reeves acknowledged the challenges and reportedly commented that the global economic landscape has shifted, and the UK is feeling the repercussions. She reiterated the government’s commitment to accelerating efforts to stimulate growth and reform public services.

However, the unexpected contraction has sparked criticism from opposition parties, who have labeled the government’s policies as ineffective in fostering sustainable economic growth.

The Shadow Chancellor reportedly described the government as a ‘growth killer,’ citing high taxes and restrictive employment legislation as barriers to business confidence and therefore growth.

As the UK navigates these economic headwinds, the focus will remain on the Chancellor’s upcoming measures and their potential to steer the economy back on track.

The January figures serve as a stark reminder of the fragile state of the UK economy and the challenges that lie ahead.

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‘A pig in lipstick’ – Trump’s strategic Bitcoin reserve criticised

Pig in lipstick

The announcement of Donald Trump’s Strategic Bitcoin Reserve has sparked a wave of criticism and debate, with detractors likening the initiative to ‘a pig in lipstick’ – a superficial attempt to dress up a flawed concept.

The reserve, which aims to stockpile or create a strategic reserve Bitcoin seized through criminal and civil forfeitures, has been touted as a bold move to position the United States as a leader in the cryptocurrency space. However, critics argue that the plan is fraught with risks and questionable motives.

One of the primary concerns is Bitcoin’s notorious volatility. Unlike traditional reserve assets such as gold or oil, Bitcoin’s value can fluctuate wildly, making it a precarious choice for a national reserve.

Economists warn that integrating such an unpredictable asset into government holdings could destabilise financial strategies rather than strengthen them.

Moreover, the initiative has raised eyebrows over its potential conflicts of interest. Critics point out that Trump’s administration has shown a growing affinity for cryptocurrency, with some officials previously holding stakes in digital assets.

This has led to accusations that the reserve could serve as a vehicle for personal or political gain rather than a genuine effort to bolster national economic security.

Supporters of the reserve argue that it represents a forward-thinking approach to embracing digital assets as ‘digital gold.’ They believe that retaining seized Bitcoin, rather than auctioning it off, could provide long-term financial benefits and signal the U.S.’s commitment to innovation in the crypto space.

However, even some crypto enthusiasts are skeptical, questioning whether the reserve’s creation is more about optics than substance.

In the end, the Strategic Bitcoin Reserve has ignited a broader conversation about the role of cryptocurrency in national policy. Whether it proves to be a visionary move, or a misguided gamble remains to be seen.

For now, the debate goes on.