Weekly Comment: Trump not going quietly on tariffs

Market overview – Richard Carter, Head of Fixed Interest Research

After markets closed on Friday, US President Donald Trump announced he would double the tariff rate on steel and aluminium imports to 50%. The new levies are effective from 4 June after the existing 25% tariffs were put in place in March.

The move marks a fresh escalation in the global trade war after several de-escalatory developments and serves as a timely reminder that although the worst case has seemingly been avoided, there will likely remain headwinds in this regard for the foreseeable future.

Trump also accused China of reneging on their recent arrangement, potentially threatening the 90-day pause in place. Tariff news continues to change at a rapid pace — earlier last week a court ruled that most of Trump’s tariffs were illegal (those targeting a country with a flat rate), although this is not a final ruling and could face protracted legal challenges. For now, the only certainty appears to be uncertainty.

Weekly economic announcements:

Last week the MSCI All Country World Index (MSCI ACWI) gained 1.3% (5.5% YTD) as global equities recouped the prior week’s declines and settled into a trading range.

United States:

US stock rose 1.9% (1.1% YTD) to move back into positive territory for 2025. Small caps underperformed large caps while tech-based benchmarks outperformed, gaining 2.0% (-0.7% YTD). Stocks made a bright start to the week due to a delay in a proposed 50% additional US tariff on the European Union, but gains were pared a little heading into the weekend.

The latest inflation data showed the core personal consumption expenditures (PCE) index rising 2.5% in annual terms in April — the lowest reading in four years and down from 2.7% previously. The weekly jobless claims rose to a 4-week high last week and although the level is relatively low by historical standards it is something to keep an eye on as we turn to this Friday’s monthly jobs report.

United Kingdom:

UK large-cap stock indices gained 0.7% last week (9.4% YTD) as mid-caps outperformed by rising 1.6% (3.5% YTD). The pound remains close to its highest level against the US dollar since February 2022, closing above US$1.35.

The main UK economic data release of the week showed a fall in business confidence in the UK services sector following employer national insurance increases and expectations for higher prices going forward. UK government bond yields were little changed on the week, falling 3 basis points (0.03%) to end the week at 4.65%.

Europe (ex UK):

European benchmarks lagged last week but still moved higher, with the MSCI Europe ex UK index ending up 0.8% (10.8% YTD). German equities gained 1.6% (20.5% YTD), French indices advanced 0.5% (7.7% YTD) and Italian bourses added 1.6% (20.9% YTD).

The euro dipped slightly against the US dollar, ending at US$1.13. This week the European Central Bank are expected to lower rates once more, with consensus calling for a 25 basis points reduction to the deposit rate.

Approver: Quilter Cheviot, 4 June 2025  

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