Archive

UK: Spillover effects from US tariffs

• The UK output destroyed by reciprocal US tariffs is only partly due to the direct impact of the new 10% rate (worth ~0.2% of GDP) and generally weaker US prospects (0.1%).
• Global GDP growth is depressed by this policy, indirectly destroying demand for UK exports from elsewhere (0.2%), especially if countries harm themselves by retaliating.
• An overall 0.6% GDP hit has two-sided risks and a skew lowered by likely negotiations. Fears of items dumping into the UK market are overblown excuses for protectionism.

By Philip Rush

US vs EU: Worse to Come

• The response to ‘Liberation Day’ by policymakers and investors alike still falls short of appreciating the scale of the threat posed by the US, as ‘transactional Trump’ is succeeded by a president who seeks to turn the clock back to a supposedly golden era in his quest to make America great again.

By Alastair Newton

HEW: Yikes, At Tonto Tariff Hikes

• Surprisingly severe global tariff hikes smashed market sentiment, dovishly depressing equity prices and rate expectations. Lower EA inflation also leans toward looser policy. Market eagerness to discount ongoing US labour market resilience seems excessive.
• Those new tariff rates are scheduled to take effect over the week ahead, with any more trading of blows potentially the main macro news. US inflation, UK GDP and the RBNZ are the more conventional highlights, but the data may be discounted as old news.

By Philip Rush

ECB Meeting Accounts - March 2025

• In the accounts for its March meeting, the ECB cited a broadly intact disinflation path and moderating wage pressures, but emphasised that rising trade and fiscal uncertainties diminish the reliability of the baseline outlook.
• While most inflation indicators point to a sustained return to target, sticky services inflation and tight labour markets present upside risks, necessitating a cautious approach to future rate cuts.
• With credit conditions easing and policy rates approaching estimated neutral levels, the ECB acknowledged that monetary policy is becoming less restrictive and refrained from signalling further easing.