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Global markets are having a volatile week, driven most notably by the US and President Trump. Late on Thursday, the Trump administration announced plans to impose tariffs of up to $60billion in annual Chinese imports. Mr Trump stated that the move was designed to address the $375billion trade deficit with China, which he described as “out of control”. Detail is currently lacking, with the list of products on which the US will apply a 25% tariff due to follow within 15 days.
As far as economic news and financial markets are concerned, the last week can be summed up in two words: fairly uneventful. At home, the Chancellor of the Exchequer delivered his first Spring Statement, replacing the traditional March Budget which has been moved to the Autumn.
The issue of tariffs remained in focus this week. As reported last Thursday, President Trump was considering tariffs of as much as 25% on imported steel and 10% on aluminum, with the aim of protecting national security and pressuring China to reform its trade practices. The logic is somewhat controversial, given China provides a mere 3% of total US imports of steel products and will not be much affected by these measures.
This week all eyes were on the US, and specifically Jerome Powell, Janet Yellen’s replacement as Chairman of the Federal Reserve (Fed). On Tuesday, Powell made his first Congressional Testimony in the role. His remarks were interpreted as bullish on the economy and, therefore, hawkish on the trajectory of interest rates. Consequently, the market is now pricing in three rate rises for the remainder of 2018, and the perceived chance of four rises has risen too.