19/04/2025 by Tony Redondo
Is the market chaos of the last few weeks abating or was it only the opening shot of something much bigger. Are we just in a trade war or in a fight for the 21st century.
Trump pressed pause on his sweeping “retaliatory” tariffs on dozens of countries for 90 days but it’s worth noting that even with the pause, the new normal is still drastically different to the pre–Liberation Day picture with a universal 10% tariff still in effect, plus China is facing even higher tariffs on its imports with Trump upping the ante on China by raising tariffs on all Chinese goods from 104 to 125% on top of the original 20% previously announced.
China does not appear to be in the mood for negotiation with China’s Commerce Ministry stating, “China will fight to the end”.
The word is that Trump has given up on the idea of any kind of grand bargain with China so instead the talk is of the US “decoupling” from China.
This week, market volatility has cooled but the slightest spark could set it all off again.
Currency Exchange Rates Update
The Pound gained nearly 1.4% on the week against the Euro to cut its monthly loss against the single currency to under 2.3%.
Against the US Dollar, the Pound enjoyed a good week, up over 1.6% and up over 2.6% in the last 30 days.
The US Dollar index has now fallen more than 4% since Trump’s ‘Liberation Day’ to hit its lowest level since 2022.
The Euro continues to attract substantial Dollar capital outflows, pushing the Euro to a fresh three year high against the Dollar
The Canadian dollar had a steadier week after the Bank of Canada surprised the markets by holding its benchmark rate at 2.75% rather than cutting as had been widely forecast.
The BoE (Bank of England) next meet on 8 May and the majority of economists expect UK interest rates to be cut by a further 0.25% to 4.25%.
What’s in the news?
UK
Reform UK’s support in Labour’s Red Wall since last July’s election has increased from 18% to 30% and its forecast to sweep through Labour’s Red Wall at the local elections scheduled for the 1st of May according to polling agency Survation.
The Survation research also shows the cost of living is the most important issue for people when deciding how they will vote in May.
Good news
The ONS (Office for National Statistics) labour market data continues to be stronger than expected showing employment rose by 206,000 in the three months to February and the unemployment rate held steady at 4.4%.
The ONS inflation data shows inflation remains stubbornly high but is lower than had been forecast at 2.6% in March.
Agents Knight Frank report that demand for London office space has hit a post-financial crisis high. Around 1.2m sq. ft of space was let during the first quarter of 2025, up 39% on the final quarter of 2024.
HSBC Innovation Banking has praised the UK’s innovation ecosystem after the UK surged ahead of France and Germany as Europe’s ‘innovation powerhouse’. UK innovation firms raised £3.2 bn of venture capital in the first three months of the year, an 8% increase from the first quarter of 2024.
Not so good news
The ICAEW (Institute of Chartered Accountants in England and Wales) recorded the highest-ever number of firms citing tax as a “growing challenge”, plunging corporate confidence into negative territory for the first time since 2022 with manufacturers and engineers the most concerned about their financial prospects.
The ICAEW’s chief executive Alan Vallance said “These findings reveal a state of despondency among businesses as they stave off a blizzard of extra outlays, including the rise in national insurance. Businesses are the catalyst for growth, but prosperity for some of them remains a pipe dream as long as these barriers remain. Tax worries have never been so prominent, causing record levels of distress for our members for the second quarter running.”
A survey commissioned by Handelsbanken Wealth & Asset Management showed nearly two in five owners of small and medium-sized firms have either left the UK or are considering an imminent departure in a shift that would sap the UK of its entrepreneurial spirit. Spain topped the list of firms’ most desirable destinations, followed by the US, France and Dubai.
The OBR (Office for Budget Responsibility) predict the tax burden will rise to 38.3% in 2027 and just one in ten small businesses are planning to hire more staff.
USA
Vice-President JD Vance has hinted that a ‘great’ trade deal with Britain is possible within the next three weeks thanks to President Trump’s deep admiration for the late Queen Elizabeth II and a unique shared cultural bond.
US Treasury Secretary Scott Bessent said, “We were discussing which countries to prioritise, and I think you are going to see some very large countries with large trade deficits come forward very quickly. If they come to the table with solid proposals, I think we can end up with some good deals.”
A CNBC Supply Chain survey suggests Trump’s tariffs won’t lead supply chains back to US as companies will go low-tariff globe-hopping. Most companies surveyed said high costs will keep them from moving manufacturing back to the US and if they do, 81% expect automation to be favoured over workers.
The Empire State manufacturing survey revealed companies’ expectations for business activity six months ahead plunged in April to its lowest since 2001 while price increases, both actual and expected became more widespread.
The EU
The ECB (European Central Bank) cut eurozone interest rates by another 0.25% to 2.25% on Thursday as the chaos of the last few weeks created widespread uncertainty and spurred fears about the eurozone’s economic growth. It’s the seventh reduction since rates peaked at 4% between September 2023 and April 2024.
In its policy statement, the ECB said that the “outlook for growth has deteriorated owing to rising trade tensions.” Acknowledgement of tightening financing conditions replaced the usual reference to a ‘less restrictive’ policy suggesting more scope for further rate cuts than was previously indicated.
Others
The WTO (World Trade Organization) warned last Wednesday that the outlook for global trade has “deteriorated sharply” in the wake of President Donald Trump’s tariffs regime. Based on the tariffs currently in place, and including a 90-day suspension of “reciprocal tariffs,” the volume of world merchandise trade is now expected to decline by 0.2% in 2025.
The IMF (International Monetary Fund) is less downbeat, saying that while trade tensions have “flared” in the wake of US tariffs, there will not be a global recession. Kristalina Georgieva, the IMF’s managing director, said: “A better balanced, more resilient world economy is within reach. We must act to secure it.”
Meanwhile, Chinese exports skyrocket over 12% in March as the trade war drives businesses to frontload shipments and China’s economy grew by 5.4% in first quarter of this year.
Gold prices hit $3,300 for the first time in history. Analysts from Invesco said “It seems that fewer countries are trusting the US and therefore US Treasuries as a ‘safe haven’ asset class. This has resulted in greater buying of gold, which seems to have become the preferred ‘safe haven’ asset class of choice.”
Gold prices have been on a record run since December, rising from $2,600 to break through the $3,000 barrier last month. Goldman Sachs analysts predict that gold will rally to $3,700 by the end of 2025 and $4,000 in 2026.
https://www.ftadviser.com/gold/2025/4/11/rise-in-gold-prices-is-screaming-signal-of-market-fear
Stranger than fiction
In an interview, Transport Minister Lilian Greenwood said people are entitled to hold private conversations in pubs, provided they don’t offend staff and make them feel “unsafe”, as she defended Labour’s ‘banter ban’. Greenwood said it was an “exaggeration” to say that the rules in the Employment Rights Bill could threaten pubs with closure. She added it was “about getting the balance” between free speech and workers’ rights.
However, the equalities watchdog has told the Government that measures in Labour’s workers’ rights overhaul could “disproportionately curtail” freedom of expression and be applied to “overheard conversations”.
Lord Young of Acton, founder of the Free Speech Union and a Conservative peer, has tabled a number of amendments that would stop pub and university bosses having to ensure their staff were not subject to harassment by overhearing opinions they did not agree with. Young says that the way the law was drafted would mean an employee could take offence on behalf of another member of staff, even if he or she did not hear the comments made.
Quote
On chaos, author Neil Gaiman, “I would like to see anyone, prophet, king or God, convince a thousand cats to do the same thing at the same time.”
