Economy Spotlight: The Most Important Events and What's Coming 10-16/03/2025

Introduction:

A week full of very important economic events and indicators, in various economies around the world, especially the major ones, starting with the developments in the customs tariff file, which is taking a slightly different turn, through the first decisions of the major central banks, and reaching the continued disparity in American economic indicators.

We will discuss these matters in this week's "Economy Spotlight" report, while reviewing the most important events awaiting global markets before heading towards the second US Federal Reserve meeting of 2025, which is increasingly anticipating the inflation index that will be issued this week, in addition to a very important economic indicator for the European Union economy that will be issued at the end of this week.

Economy Spotlight. Major Economies:

First. The US Economy:

The US economy began last week by escalating tariffs and putting them into effect on both Canada and Mexico and doubling them on the Chinese side from 10 to 20%, before starting to head towards a different and calmer path. This is the approach that was initiated by US Secretary of Commerce Howard Lutnick, and his statement that these tariffs will not affect Canadian and Mexican imports that comply with the trade agreement signed between the three countries in 2020. 

Then, Trump’s decision at the end of last week to suspend tariffs on Mexico and Canada until April 2, the same deadline for the implementation of tariffs on European goods. Then, he wrote on the social networking site Truth Social that he spoke with the President of Mexico, to confirm that Mexico will not be required to pay customs duties on anything that falls under the USMCA agreement.

As for the new thing in the tariff file, it was Trump’s criticism of the very high customs duties imposed by India on American goods, which is an indication that India may be the next party that could be included in Trump’s customs duties. All these developments were enough to raise the state of economic uncertainty, which many parties began to point out loudly. 

The Federal Reserve’s Beige Book, which is issued two weeks before the Federal Reserve holds its meeting, was issued, and which provides an overview of the US economic situation, and which included 47 indications of uncertainty, up from 17 cases that were present in the bulletin last January.

Fed Chairman Jerome Powell also referred to the state of economic uncertainty, at a research conference in New York, which was Powell’s last appearance before the start of the Federal Reserve meeting on the 19th of this month.

Indeed, the state of economic uncertainty was also evident in the very important economic indicators that were issued last week. The ADP non-farm private sector employment change index, a leading indicator of the health of the US economy, was issued, and this index recorded a significant decline and more than expected, from 186 thousand jobs to 77 thousand jobs, which raised concerns among economists and investors alike, because it indicates a slowdown in the pace of job creation in the private sector. However, the US labor market indicators, which concluded last week, highlighted very important matters, as average wages did not record a slight decline monthly, and rose less than expected on an annual basis, while the non-farm payrolls report added fewer jobs than expected. However, the part-time workers’ index rose to levels that are the highest in three and a half years, indicating a decline in companies’ appetite to hire full-time employees, which reflects their uncertainty in the medium and long term. The unemployment index was also released, which is the first indicator during the Trump era, and it recorded an increase that some analysts viewed with pessimism, as they believe that the rate may rise in light of the impact of companies and employment on tariffs and the negative impact they may have on their business.

Second. European Economy:

Last week was a good one for the European economy, driven by Germany’s ambitious $500 billion strategy and plan, which will increase spending on infrastructure and investment, with the aim of revitalizing the faltering German economy for two consecutive years.

The European Commission also proposed an urgent defense spending plan of $841 billion, in a move that will strengthen the Eurozone and enable them to support their economic growth together.

This was not good news for the European economy, as the global investment bank Goldman Sachs raised its economic growth forecast for the Eurozone, expecting the Eurozone to grow by 0.1 percentage points to 0.8%, while indicating that it does not expect the Central Bank to make another interest rate cut until the upcoming July meetings.

This good news coincided with the European Central Bank’s meeting, which cut interest rates for the sixth time, to 2.5%, after it was somewhat reassured that inflation had fallen for the first time in three months.

The European Central Bank Governor, Christine Lagarde, confirmed that she will rely on the upcoming economic data to make future decisions regarding interest rates, and stressed the state of economic uncertainty considering geopolitical tensions and violent US tariffs. 

This week, the Eurozone will release several key economic indicators, including industrial production, which is expected to rise by 0.8% month-over-month on Thursday. If accurate, this would mark the highest growth since August 2024, potentially boosting financial markets and the euro, particularly if US inflation data also improves.

Third. Japanese Economy:

Japanese inflation continues to exceed the Bank of Japan’s target, keeping hopes alive that the central bank will raise interest rates to new record levels at its next meeting on the 24th of this month.

Japan also witnessed constructive high-level talks on economic security between Britain and Japan, with the aim of promoting free trade and strengthening commercial relations in sectors from technology and defense to renewable energy.

The Japanese economy is still expected to grow by 1.3% this year, driven by wage gains, business investment and exports, although inflation is likely to remain above the Bank of Japan’s targets.

Fourth. Chinese Economy:

China confirmed last week at its annual parliamentary meeting that it is targeting 5% growth for the year and pledged to pump billions of dollars into its ailing economy, which is now facing a trade war with the United States, in continuation of the historic stimulus that China launched in September of last year.

This meeting comes considering what China is suffering from a wave of deflation and falling prices, which indicate the continued contraction of domestic demand that limits the Chinese government’s ability to achieve the economic growth it hopes for.

The Chinese economic contraction was confirmed by the latest inflation reading, which recorded negative levels for the first time in 13 months on an annual basis, while the core consumer price index, which excludes energy and food, fell for the first time since 2021, which is the second time this index has contracted in more than 15 years, but analysts believe that the March reading will give a more accurate indication of the success of China’s historic spending.

China surprised Canada by announcing the imposition of customs duties on Canadian agricultural and food products worth more than $2.6 billion, in response to the duties imposed by the Canadian government in October of last year, which was interpreted as opening a new front in a trade war driven by US tariffs that began since Trump took office for his second term. As for the important economic indicators, they were represented by the trade balance and inflation indicators. China's trade balance recorded the highest increase, at about $170 billion, with its foreign exchange reserves rising to more than $3.22 trillion, to remain the country with the highest foreign exchange reserves.

Economy Spotlight. Economic Calendar and What to Expect in the Markets Next Week:

Global markets will be awaiting the following economic data: