Trump's tariffs rattle global markets – and other economic stories to read this week

This week, Donald Trump's administration delivered on a key pillar of its proposed second-term economic agenda, imposing sweeping trade tariffs that have sparked international tensions and economic concerns.

A 10% duty was imposed on Chinese imports, while 25% tariffs on Canada and Mexico were temporarily delayed. Collectively, these countries account for over 40% of total goods traded with the US, and this policy shift has rattled global markets, Reuters reports.

The Canadian dollar hit a 20-year low, while the Mexican peso remains volatile, and the euro faces pressure amid fears the European Union is next. However, despite the tariffs, China’s yuan has remained stable.

The auto sector has also warned of major profit losses, globally but particularly in the US, with analysts cautioning that ongoing uncertainty could slow economic growth and fuel inflation worldwide.

US job growth slowed in January, impacted by weather and wildfires, while economists say a 4.0% unemployment rate may delay Federal Reserve rate cuts until June.

With the EU bracing for potential US trade tariffs, the eurozone economy rebounded in January, as the HCOB composite PMI rose to 50.2, marking a return to growth after two months of contraction. A modest expansion in services (51.3) helped offset continued weakness in manufacturing.

However, the outlook remains uncertain amid rising input costs and political instability in major economies like Germany and France, Reuters reports. While employment and new orders showed slight improvement, business confidence dipped, reflecting caution over global economic pressures.

The EU may use its anti-coercion instrument (ACI) - a trade tool allowing Brussels to restrict services in response to tariffs - to target US industries, including Big Tech, if Trump imposes duties, the Financial Times reports.

European Central Bank economists estimate the eurozone’s neutral interest rate at 1.75%-2.25%, suggesting borrowing costs could settle around 2% after two more rate cuts. However, they caution against over-reliance on this theoretical measure amid shifting economic conditions, Bloomberg reports.

Canada’s unemployment rate fell to 6.6% in January, down from 6.7% the previous month, as the economy added 76,000 jobs - well above the 25,000 forecast by Reuters analysts. This marks the second consecutive monthly decline in joblessness, though total unemployment remains high at 1.5 million.

China’s new yuan loans surged to an estimated 4.5 trillion yuan ($618 billion) in January, up from 990 billion yuan in December but below last year’s record 4.92 trillion, a Reuters poll showed. The decline is attributed to subdued credit demand and fewer working days due to an early Lunar New Year.

Mexico’s annual inflation slowed to 3.59% in January, below forecasts of 3.61%, as easing price pressures and an economic contraction allowed the central bank to accelerate rate cuts. Banco de México lowered its benchmark rate by 50 basis points to 9.5% and signalled further cuts ahead.

South Africa’s rand edged up 0.2% to 18.68 per dollar on 4 February as markets reacted to Trump’s shifting tariff stance.

India’s central bank has lowered its benchmark interest rate for the first time in nearly five years, cutting the repo rate by 0.25 percentage points to 6.25% in a unanimous decision. The move, widely expected by economists, aims to bolster economic growth amid a broader slowdown, says the FT.

The Bank of England has halved its growth outlook for the year from 1.5% to 0.75% - and cut interest rates to 4.5% on 6 February. Governor Andrew Bailey said rates remain on a downward path, the BBC reported.

Turkey’s central bank is “not on autopilot” after two consecutive rate cuts, Governor Fatih Karahan said on 7 February, emphasizing a data-driven approach. His remarks followed the bank’s decision to raise its year-end inflation forecast to 24% from 21%.

Indonesia’s annual inflation rate fell to 0.76% in January, the lowest since 2000, down from 1.57% in December and below Bank Indonesia’s 1.5%-3.5% target range. The decline is attributed to lower electricity tariffs and airfares.

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