Global markets trembled as President Trump reignited trade tensions with a fiery social media post and a fresh wave of tariffs, signalling a dramatic shift in US economic policy. With the White House labelling 2nd April as “Liberation Day”, the investment world is on edge, awaiting the full impact of sweeping new trade measures targeting key partners including Canada, Mexico, and China.
President Trump’s declaration that the United States has been “ripped off and abused” for decades was followed by an aggressive move to impose 25% tariffs on imported finished cars and selected auto parts. This unexpected policy pivot triggered a sharp sell-off across global equity markets, fuelling a fresh bout of investor anxiety. The White House has been reviewing international trade relationships intensively, with Trump expected to unveil a detailed tariff plan, including so-called “reciprocal tariffs”, this evening. The aim is to address what the administration sees as long-standing imbalances in taxation, regulation, and subsidies disadvantaging US interests.
The complexity of tailoring tariffs by country has led many to believe the details will remain vague and subject to further negotiation. For now, investors are grappling with uncertainty—a factor that tends to undermine confidence and heighten volatility. Some market optimists suggest the classic market axiom of “buy the rumour, sell the fact” might flip in this scenario, with the tariff news already priced in. However, that view assumes a quick resolution, which appears unlikely given the intricacies of international trade retaliation.
Adding to the uncertainty, investors were dealt another blow last week as inflation data—specifically the Federal Reserve’s preferred metric—came in above expectations at 2.8%. Simultaneously, Americans appear to be tightening their belts, saving more and spending less. Together, these factors dampen hopes that the Fed will intervene with further rate cuts to counterbalance the cooling US economy.
The approaching first-quarter earnings season in the US will serve as a key moment for investors to assess the real-world effects of tariff concerns. The focus will be on corporate sentiment—particularly regarding capital expenditure plans and employment intentions—offering early insight into whether trade fears are translating into reduced growth prospects.
Back in the UK, Chancellor Rachel Reeves’ Spring Statement failed to excite. Yet markets responded positively to her emphasis on fiscal restraint through spending discipline rather than tax hikes. Still, the revised Office for Budget Responsibility forecast of just 1% GDP growth for 2025—down from 2% six months ago—reinforces the cautious mood.
Looking ahead, attention turns to two critical data points: a US manufacturing survey that risks slipping into contraction territory and Friday’s US non-farm payrolls report, with consensus estimates of 135,000 new jobs. Any shortfall could further darken the outlook, especially as major institutions like Goldman Sachs have raised their recession probability forecast to 35%, citing weakening confidence across both households and businesses.
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