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The Week Ahead - 28 April - 2 May 2025
These are the Key Macro Events for the upcoming week.
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.
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.
US-China trade war: Twist and Shout
Late Friday evening, the US exempted popular electronics from reciprocal tariffs. The exemption provides particular relief to some of the magnificent seven, and others, who rely on Chinese manufacturing of electronics. Overall, roughly $390 billion of US imports were exempted, including about $100 billion from China.
The Week Ahead - 14 - 18 April 2025
These are the Key Macro Events for the upcoming week.
One week later - Reversal Day
Reciprocal tariff pause limits downside risks, but growth shock still significant
US - What will trigger the Fed put?
The substantial decline in equity indices is unlikely to lead to the Fed easing substantially. The liberation day shock pushes the Fed in opposing directions, with market pricing reflecting just one of them. Current market pricing would require the unemployment rate to rise to about 5.6% by year-end 2026, without a rise in inflation. We think the Fed will keep rates moderately restrictive until second half of 2026, when they can gradually start easing with 25bps per quarter.
The Week Ahead - 7 - 11 April 2025
These are the Key Macro Events for the upcoming week.
Tariffs risk recession - a forecast update
President Trump announced sweeping ‘reciprocal’ tariffs based on the size of the bilateral trade deficit. We expect both the US and the eurozone to slow sharply and only just skirt a recession, while the US will also have to deal with higher inflation. Monetary policy divergence is likely to re-emerge as a theme, with the ECB cutting rates further but the Fed remaining on hold. Fiscal stimulus should help drive a eurozone recovery in 2026, but growth improvement in the US next year will be more tepid.