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Spring Budget raises deficits but sticks to fiscal rules
Discussions on the Spring Budget are completed and the coalition published their plans. The new plans include various measures to boost household purchasing power on the short term, while structural investments appear to lack. The coalition lost their majority according to the latest polls. Despite pressure from other coalition parties for larger deficits, the VVD upheld budgetary rules . Next year, the funding need for the Dutch state will increase because of the higher deficit, higher redemptions and a one-off payment for the pensions of the defence personnel.
The Week Ahead - 28 April - 2 May 2025
These are the Key Macro Events for the upcoming week.
ESG Economist - Carbon price for shipping below transition cost
International shipping is responsible for about 2% of the world's greenhouse gas emissions. This means it plays a part in reaching net-zero emissions, which would help limit global warming to 1.5 degrees. The shipping industry follows various regulations and targets from organizations like the International Maritime Organization (IMO), the Poseidon Principles, and the European Commission's Fit for 55 initiative. Shipping was included in the Emissions Trading System (ETS) in 2024. During the IMO's Marine Environment Protection Committee meeting (MEPC 83) from April 7-11, policy measures were discussed to meet the emissions targets set in the IMO's 2023 strategy. This publication focuses on the results of this meeting and what they mean for the maritime shipping industry.
Carbon Market Strategist - Prices drop following unprecedented tariffs
Carbon prices plunged to levels last seen twelve months ago after a temporary surge in late March. The decrease in prices was driven by a decline in gas prices following the announcement of the sweeping global US tariffs on 2nd of April, which was beyond expectations both in terms of their scope and levels. The tariffs have led to deterioration of the global economic outlook. Lower expected Asian demand, a main competitor for LNG, relieved the tightness in the market and drove European gas prices downwards. Carbon prices closely followed the movement of gas, as the correlation between the two markets remains at high levels. Accordingly, market positioning has moved back to more neutral levels, as traders unwound long positions. Meanwhile, new emission data shows a reduction of 2.3% in 2024 compared to 2023, where emissions witnessed a decrease in the power and industrial sectors, while that of aviation observed an increase. Furthermore, the carbon market remains responsive to weather conditions and geopolitical developments. EUA prices were trading around 66 EUR/tCO2 at the time of writing.
China - The Art of the No-Deal
Following sharp escalation of US-China trade war in April, a direct export shock to the US is imminent. Exemptions for electronics, trade circumvention/reorientation and more support will mitigate this shock. We lowered our annual growth forecasts for 2025/ 2026 to 4.1% (from 4.3%) and 3.9% (from 4.2%).
US - The US has already lost the trade war
One of the primary objectives of the Trump administration’s (trade) policies is to become less dependent on China, but policy implementation is poorly aligned with overall goals and too erratic. The trade war hurts everyone, but it hurts the US more than other major economic players. The price of China-decoupling is higher than just inflation: the US risks losing control of the global financial system.
The Netherlands - Revised growth forecasts in response to the US tariffs
We have revised our growth forecasts to 1.4% for 2025 (from 1.8%) and 1.3% for 2026 (from 1.0%). Discussions on the Spring Memorandum have ended and the coalition has published their plans. They likely provide a short term boost to households’ purchasing power, but structural investments lack.
Eurozone - Tariff reversal is some relief, but no game changer
High uncertainty continues to impact the eurozone economic recovery. The recovery is halted by tariffs in the near term; fiscal policy raises growth outlook in 2026 . Disinflationary forces mean the ECB is likely to cut rates further to 1.5% by September.
Global Monthly - The only certainty is uncertainty
US policy has been erratic, to put it mildly. Tariffs were announced, paused, and then focused on China, but with key exemptions. It is unclear what the Trump administration actually wants. This makes predicting outcomes even harder. With uncertainty the only real certainty, the global – especially the US – economy is the main casualty. But so, increasingly, is the US’s leadership of the global financial system. Spotlight: The US dollar is facing testing times, but the real test is still to come. Despite the pressures it is facing, we still see no viable alternative.
Key views Global Monthly April 25
US tariffs surprised even our pessimistic expectations, and despite the 90 day reprieve for the biggest rises, significant tariffs remain in place. The US has focused chiefly on China, as we had long expected, but the eurozone (and the rest of the world) are still hard hit – by both tariffs and the policy uncertainty. Interest rate cuts and other forms of policy support are a cushioning factor in the eurozone and China, while in the eurozone specifically, defence spending, and in Germany new infrastructure spending will support growth in 2026. Global trade and growth are also initially benefiting from a frontloading of US imports ahead of tariff rises. Still, the nascent recoveries in domestic demand in the eurozone and China face downside risks from weaker confidence, while in the US, demand will be hit by the tariff shock to real incomes. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. This is likely to drive a divergence in Fed & ECB policy, with Fed policy staying on hold until late 2026, and the ECB continuing to cut rates.