3 April 2025
If you are covering the financial and market reaction to the tariffs announcement by President Trump yesterday, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“As markets digest Donald Trump’s harsh tariffs, it is clear these rates were much more punitive than the market was expecting. Trump spoke sternly on the need to right the wrongs of the past and make America wealthy again, but in the short-term what this has done is stoked an already tense global trade situation and increased the chances of a major slowdown in growth both in the US and globally. The chances of a recession in the world’s largest economy have now increased to the point where the market thinks it is likely. How Trump spins this, and the fact these tariffs will add to the inflationary fire, is anyone’s guess.
“Markets, unsurprisingly have reacted badly. Treasury yields have fallen sharply, as investors take flight and look for safe haven assets. This would suggest the Federal Reserve will need to put additional rate cuts on the table to look to prevent that recession being triggered, but should it face inflation rising too, it is in somewhat of a bind. Any hint of stagflation puts the soft landing that was achieved post-Covid very much in doubt. The jobs data is going to be key, with a first hint tomorrow likely to reveal how employers have been responding to Trump’s moves so far. While it won’t yet reflect any of the tariff moves, it will give an indication of how robust the jobs market is and whether it can withstand a downturn in growth.
“These are likely to be volatile times ahead for consumers, businesses and investors alike. We have entered a new age of economic order and Trump wants to call the shots. He wants to play the long game, but as ever in politics he may not have the time. The moves of other major economies will be closely watched as the trade war likely ratchets up from here.”
