Trump’s tariff trade war went worldwide last night as his global tariffs on aluminium and steel imports kicked into gear. The export duties immediately saw declines in the pound and euro, which had been enjoying gains earlier in the week.
While the immediate loser from the new tariffs is the industrial sector, it may lead to knock on effects in other UK markets as reduced trade slows down growth. Prime minister Keir Starmer has already said he won’t be retaliating with tariffs of his own. The European Commission is taking a different approach, announcing €26bn of retaliatory tariffs against American products.
This tariff tit-for-tat, with Trump applying on-again, off-again tariffs has left the markets reeling. For large overseas purchases, such as house prices, the amount buyers will pay has been fluctuating from day to day.
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With no major data releases planned for either the UK or EU today, the pound and euro will largely be at the mercy of global news. This afternoon, the US will publish inflation data that could indicate the start of a feared Trumpcession, which would further impact currencies.
One story the market will be reacting to is the news that, late on Tuesday, Ukraine agreed to a 30-day ceasefire. All eyes are now on Russia to see if it will halt its military operations, too. It would be the first break in hostilities since Russia invaded Ukraine three years ago and could be the first steps to a longer lasting peace deal. Markets anticipate a peace would bring loosened economic sanctions on Russia and restorations of trade.
A big driver of the current cost of living crisis has been increased energy prices as countries have avoided buying Russian resources. A peace and an end to sanctions would likely see those prices fall.
As we head toward the end of the week, the big story to look out for will be UK GDP data released on Friday. It will reveal how well the government’s growth agenda has been working, impacting the frequency and depth of future interest rate cuts.
