The British economy has experienced a tumultuous year in 2024, beginning with a modest rebound from a recession but descending into stagnation in the latter half. This list of new tariffs is about to get much longer, here in the U.S. and under President Donald Trump. As a consequence, the UK will be hit hardest, especially by universal tariffs on steel and aluminium. This new development further complicates already tense trade relations between the United States and the European Union. The EU has publicly protested the Trump-instigated trade conflicts.
The EU has been a powerful force encouraging countries to cooperate. They need to address fundamental concerns such as overcapacity, trade imbalances, unfair subsidies, denial of market access and IP theft. Ursula von der Leyen, President of the European Commission, emphasized the importance of a unified approach, stating, “We are open to negotiations. We will approach these negotiations from a position of strength. Europe holds a lot of cards, from trade to technology to the size of our market. This strength is built on our readiness to take firm counter-measures if necessary. All instruments are on the table.”
The U.S. government deficit keeps growing, adding pressure and worry that it’s having an outsized impact on the rates market. These anxieties are exacerbated in times of economic strife. According to recent data released by Eurostat, annual inflation in the eurozone fell to 2.2% in March. That continuing ambiguity has led Goldman Sachs to recently downgrade its UK growth outlook. The fundamental changes in these countries the bank says have become possible largely due to favorable potential trade spillovers.
Across the pond in the United Kingdom, there is a bit of a fearful hope for the reemergence of Trump’s tariffs. Keir Starmer, leader of the Labour Party, acknowledged the likelihood of tariffs but expressed hope for mitigating measures through negotiations: “We are of course negotiating an economic deal which will I hope mitigate the tariffs.” Starmer further noted that while no one wants a trade war, all options must remain on the table as he aims to act in the national interest.
Even given these expected hurdles, analysts have noted the erratic ebb and flow of market activity. Germany’s DAX index of blue-chip stocks paced gains among major European bourses on Tuesday, soaring 1.7%. Thyssenkrupp’s stock skyrocketed by 6% after the news because analysts at Kepler Cheuvreux just upgraded their rating. This increase is driven by the forecast benefits from the increased fiscal stimulus in Germany.
Goldman Sachs has pretty radically changed its bullish outlook on U.S. markets. It recently lowered its three-month S&P 500 forecast to a 5% drop from a previously flat outlook, ascribed to concerns over rising tariffs and decelerating global economic growth. Wolf von Rotberg, a market analyst, commented on the situation: “He won’t provide a put to the market; the only put which can be provided to the market is the Fed.” He warned that Trump’s plans in the longer term could carry risks that push inflation up and make monetary policy more challenging.
As investors are left reeling from unknowns, this has resulted in gold values skyrocketing. Traders are running to this safe haven asset on worry over Trump’s trade war plans. U.S. stocks opened lower on Tuesday as investors awaited clarity from the administration regarding its tariff policy rollout scheduled for Wednesday.
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