Stocks slipped at the start of the week as investors reacted to Donald Trump’s tariffs. In response to new U.S. duties on Chinese goods, China hit back on Tuesday, imposing fresh tariffs on American imports. According to China’s Finance Ministry, the country will levy a 15% tariff on U.S. coal and LNG and a 10% tariff on crude oil, farm equipment, and select automobiles.
This move comes just a day after a brief reprieve in trade tensions. On Monday, President Trump unexpectedly suspended his planned 25% tariffs on Mexico and Canada, opting instead for a 30-day pause in exchange for concessions on border security and crime enforcement.
Trump has already warned that the UK is “out of line” in its trade with the U.S. However, Britain enjoys a more balanced relationship with America, which remains its largest single export market. This likely explains why Trump suggested that any imbalance could be “worked out,” easing investor concerns. The broader European Union, however, may not be so lucky. When asked how the bloc could avoid looming tariffs, Trump’s stance was: “The one thing they can do quickly is buy our oil and gas.” However, while we can likely expect some short-term noise in markets as tariffs are ironed out, current proposed levies are likely to be the beginning of wider trade negotiations between the U.S. and its major trading partners that eventually lead to strengthened global trade relations.
In January 2025, the Euro Area’s annual inflation rose to 2.5% from 2.4%, surpassing expectations. A breakdown of the figure showed a surge in energy costs, while price growth slowed for services. Core inflation stayed at 2.7% for the fifth month, slightly above forecasts but at its lowest since early 2022. This follows the European Central Bank’s recent rate cut to 2.75% amid ongoing concerns of stagnation and sluggish growth. Meanwhile, the European Commission unveiled a plan last week to reform the bloc’s economic model, addressing fears that bureaucracy, low productivity, weak investment, and high energy costs are hindering competitiveness with other global economies.
