Economy Spotlight the Most Important Events and What's Coming 07-13/04/2025

Introduction:

This week's report examines the most significant consequences of the US tariffs imposed on April 2, reviewing the most important aspects related to the US's implementation of its tariffs. The report also presents key opinions and analyses regarding the potential impact of these tariffs and retaliatory tariffs on the global economy.

Main keywords:

• The basic tariffs take effect, and important details may offer a glimmer of hope in the potential trade war. 
• US financial markets lose approximately $5.4 trillion in two days after Trump's tariffs. 
• China responds to the US by announcing the implementation of reciprocal tariffs at the end of this week, pushing for a postponement of the TikTok deal, and calling on Washington for equal consultations.
• The European Union representative is heading to China this week for talks on agreements to deepen investment and trade. 
• The Bank of New Zealand is meeting this week to decide on its interest rate, with expectations of a fifth cut to 3.5%. 
• Tariffs could harm the Japanese economy, according to official statements and analysis by a Japanese institute.
• Financial markets are awaiting the release of the US inflation statement, with expectations of a decline.

Economy Spotlight. Major Economies:

First. The US Economy:

The US economy has experienced a difficult week amid heightened anticipation and a tense atmosphere before the US President announced the implementation of tariffs on various countries, in addition to the imposition of basic tariffs of approximately 10%. The 10% tariffs went into effect on Saturday of this week, with additional tariffs set to go into effect on Wednesday of this week. There is some good news regarding the basic tariffs (10%), as all goods loaded on ships and aircraft bound for the US at the time of the decision were granted a 51-day grace period to enter the US market without additional basic tariffs. Meanwhile, Vietnam, which was subject to a 46% tariff, announced discussions with Trump regarding the tariffs. Meanwhile, the Trump administration exported approximately $645 billion worth of goods duty-free, including crude oil, petroleum products, other energy imports, pharmaceuticals, uranium, titanium, timber, semiconductors, and copper. These higher-than-expected tariffs have caused severe bleeding in financial markets, with US stock indices closing last week with their worst performance since March 2020. The tech-heavy Nasdaq fell nearly 10% since the tariffs were announced last Wednesday. The Dow Jones Industrial Average fell nearly 9%, while the S&P 500 fell by 9.6%. Goldman Sachs estimates the total losses in US markets after Trump's tariffs at approximately $5.4 trillion.

With Trump's tariff wall now in place, the US economy is now in a state of uncertainty, especially as expectations of an economic recession have risen by nearly 60%, with the VIX volatility index exceeding 45 for the first time since 2020—an indicator often described as a fear index.

Economic sectors have been severely shaken, with the technology sector leading the way, along with the auto and steel sectors. Federal Reserve Chairman Jerome Powell said late last week that the new tariffs could lead to economic repercussions, including higher inflation, slowing economic growth, and threatening the Fed's efforts to push inflation toward the target rate of 2%. This raises doubts about the Fed's ability to cut interest rates at its upcoming meetings, despite Trump's statements indicating the need for the Fed to lower interest rates.

Goldman Sachs, in its latest report to clients, noted that hedge funds around the world sold global stocks at the highest daily selling value (last Thursday) since 2010.

From cars, steel, phones, and many other goods that the United States imports from abroad, Trump's tariffs pose a significant threat to American consumers, according to global analysts. The US released a series of economic data and indicators, most notably the non-farm payrolls index, which unexpectedly rose by 228,000 jobs in March. Meanwhile, the unemployment rate rose to 4.2%, which was described as the calm before the storm if no negotiated solutions are reached to mitigate the severity of US tariffs and corresponding tariffs from other countries.

Second. European Economy:

The European economy was one of the parties most eagerly awaiting the US ally's tariffs, after the European Union representative failed to avert these tariffs during lengthy meetings with the US side last month.

The European economy was hit by Trump's tariffs, estimated at 20%, in addition to the basic tariff (10%), prompting analysts and economists to raise concerns that this could revive the risk of inflation, harming European economic growth.

Goldman Sachs expected the European Central Bank to cut interest rates in April, followed by another cut that would bring interest rates to 2% by June. Some other analyses indicated the possibility of the central bank pausing to test the effects of the tariffs, which Christine Lagarde indicated could raise inflation in the eurozone by 0.5% in the first year.

The European side pledged to respond to the tariffs, while the European Union Trade Representative began a quick visit to China with the aim of deepening trade and investment and countering US tariffs. Last week, the eurozone inflation rate fell to 2.2% year-on-year, despite rising month-on-month. This raises the likelihood that the ECB will continue to cut interest rates at its April 17 meeting.

Third. Japanese Economy:

Japan has issued numerous statements regarding the 24% US tariffs and the potential disruption they could cause. The giant Japanese shipping company, Japan Shipping Corp., expressed concerns that the tariffs would slow the flow of goods due to their rising costs, particularly for automobiles and everyday goods, which would harm consumer demand, which Japan seeks to maintain in balance.

Estimates indicated that these tariffs would significantly harm exporters who rely on the US market.

Japanese analysts, including those at Nomura Research Institute, warned that these tariffs could contribute to slowing Japan's export-dependent economic growth by approximately 2% over the coming years, and reduce this year's GDP by 0.7%.

Bank of Japan Governor Kazuo Ode emphasized that these tariffs would significantly impact global trade, warning of a potential blow to global growth.

Fourth. Chinese Economy:

China was the most prominent country to respond to the US tariffs, initially criticizing the tariffs before retaliating by imposing an additional 34% tariff on US goods entering the US effective April 10. It also expressed its willingness to form alliances with several countries to respond to and address the US tariffs.

The Chinese responses led the US to postpone the decision on the sale of TikTok's US operations for 75 days, while pledging to work with the Chinese side on various issues during this period.

The Ministry of Finance also expressed its deep regret and categorical rejection of Fitch Ratings' decision to downgrade China's sovereign credit rating due to concerns about public debt and weak public finances. The Chinese Ministry described the downgrade as biased, especially since the agency emphasized the strength of the Chinese economy and its strong growth prospects.

Performance of major global market indices following Trump's tariffs:

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

Global markets will be awaiting the following economic data: