Many felt that a tariff war with China was not one the US could easily win in the short term. China’s capacity to absorb the pain of rising prices always seemed higher than the US consumer’s willingness to pay elevated prices for their products. It probably isn’t any great surprise therefore that once again Donald Trump has rolled back from his initial position and for 90 days at least, US tariffs on Chinese goods will fall from 145% to 30% and Chinese tariffs on US goods will fall from 125% to 10%. It’s important to remember that this move is only temporary so the likelihood is that negotiations will remain at the front of investors’ minds, and there seems little doubt that Trump’s list of complaints surrounding levels of trade will remain a long one.
The UK has of course done its own deal with the US, but with some specific exceptions such as autos, steel and aluminium it still leaves tariffs on most UK goods entering the US at higher rates than before Trump took office. Maybe we should be grateful for any small win at the moment, and along with the UK-India deal it does at least suggest the UK remains open for business.
So all things being equal, markets remain focused on the positives and are on the rise once again. First quarter earnings have generally been positive although an increasing number of companies are cautious about making forecasts for the remainder of the year given the continued uncertainty surrounding trade policy and the risks of a global recession. Households in the UK continue to be given a boost from falling interest rates, and I would expect this to continue throughout 2025, so the question now is whether Keir Starmer can do a meaningful deal with the EU? Watch this space.
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