​Last week, President Donald Trump reignited global trade tensions by continuing his tariff policy. During “Liberation Day,” the President announced a sweeping plan, imposing a baseline 10% tariff on all imports and sharply escalating tariffs on countries deemed to have unfair trade practices. For those countries, tariffs of up to 50% were announced. China was hit hardest, with tariffs reaching as high as 145%. While many countries chose to limit retaliatory measures and instead focus on reaching an agreement with the US, China imposed matching tariffs of up to 125% on US products, blacklisted several American companies, and restricted exports of key materials. The latter includes rare earth metals, which are crucial in today’s world as they are vital for many technological products. In response to global backlash, Trump announced a 90-day delay on the tariff increases for most countries (excluding China), attempting to contain diplomatic fallout while maintaining a tough stance on trade imbalances. Amid further concerns that tariffs on key growth-spurring sectors such as technology and pharma could backfire, the administration announced additional reprieve by limiting tariffs on such critical goods.

Since President Donald Trump's inauguration, his administration has threatened or implemented a series of tariffs aimed at reshaping US trade relationships and bolstering domestic industries. These measures have targeted a range of imports, including steel, aluminium, and various goods from Canada, Mexico, and China, with the intention of reducing trade deficits and addressing national security concerns. In the past two weeks, the administration has intensified its trade policies by imposing a 25% tariff on imported automobiles and certain automotive parts. Announced on 26th March 2025, these tariffs are set to take effect on 2nd April 2025 and are expected to significantly impact both foreign automakers and domestic companies that rely on global supply chains. Consumers may face increased vehicle prices, with estimates suggesting potential increases of up to $12,500 per imported vehicle. ​Concurrently, the Federal Reserve has maintained the federal funds rate at a target range of 4.25% to 4.50%. The decision reflects the central bank's cautious approach amid rising inflation and economic uncertainties exacerbated by ongoing trade tensions. Policymakers are holding onto their pace of two rate cuts as projected at the beginning of 2025. The Fed also highlighted that tariffs make their decisions more difficult, as it likely alters the inflation rate. ​

In his current presidency, President Trump's aggressive tariff strategy has significantly impacted financial markets, introducing heightened volatility and uncertainty. The new administration has already introduced unprecedented tariffs within its first two months. Figure 1 provides an overview of currently imposed and threatened tariffs. These tariffs imposed by the US on other countries has also led to significant retaliations from those countries, which exacerbates the issue even further. The fact that the Trump administration also threatens tariffs nearly on a daily basis further bolsters global uncertainty. These tariffs have also disrupted established trade relationships and supply chains, leading to increased costs for businesses and consumers alike. Investors are now grappling with the potential for slower economic growth, as higher import costs contribute to rising inflationary pressures. Market participants also showed some optimism on a Trump administration for the anticipated resolutions of ongoing wars, especially in Israel and the Ukraine. While most successful in Israel, the situation between Russia and Ukraine remains highly unstable. These developments have undermined investor confidence, compelling market participants to reassess risk exposures and seek refuge in more stable assets. Consequently, the financial markets are navigating a complex landscape, where protectionist policies challenge the principles of free trade that have long underpinned global economic growth.

​Over the past weeks, a key election for Europe took place in Germany. Elections turned out as expected with strong gains of the CDU and AfD and heavy losses of the previous ruling coalition. It also showed a significant shift to the right. It is highly likely that the CDU will form a coalition with the SPD to achieve a majority. With a stalling economy, the removal of their “debt brake”, which limits the country to borrow at maximum 0.35% of their GDP, is high on the agenda. In conjunction with Trump’s administration, European countries will likely increase their defence spending over the coming years, as Europe is contributing significantly less to NATO than the US. The new administration in the US is also not slowing down after its highly active start on 20th January 2025. In particular, the proposed and increasingly severe tariffs have caused markets to plunge in the past weeks. Not only are companies hurt directly by countermeasures of other countries, but it also causes significant headache on a return of increasing inflation with already high interest rates.