Hello MarketShalians, Welcome to today’s World Economy Actions and Its Impact financial blog at MarketShala. Let us take a look at what major buzz related to the economic actions are taking place in the country and the world and what impact they are going to have.
Table of Contents
Shifting Global Power: Europe Gains Strength as U.S.-China Trade Tensions Deepen
- German 10-year bonds outperformed U.S. Treasuries last week by a record margin.
- America’s loss in financial markets is proving to be Europe’s gain.
- The euro is at its strongest in three years. Last week German 10-year bonds beat Treasuries by the most points ever. And while European stocks have been hit by the trade war, they are proving far more resilient than U.S. stocks.
- Gold hit a new record and the Swiss franc rose.
- China wants to see steps from the Trump administration before agreeing to trade talks, including showing more respect by reining in disrespectful remarks by officials, according to a person familiar with Chinese government thinking.
- Wednesday: New U.S. restrictions on exports of Nvidia chips to China and a disappointing report from chip-equipment maker ASML fueled trade war concerns, sending technology stocks tumbling. The drop wiped out $155 billion in market value from two companies alone.
- Falling inflation in Britain has raised the prospect of three interest rate cuts in 2025, starting in May.
Bank of Canada Weighs China Tariff Scenarios: Growth Risks Rise Amid Trade Tensions
The Bank of Canada held rates steady yesterday as expected. The Bank of Canada considered China’s outlook according to 2 scenarios.
Scenario 2, tariff increases weigh on exports. Policy support mitigates the negative impact from tariffs. Growth would slow to 4.6% in 2025 – 0.2 percentage points lower than in Scenario 1 – and average 4¼% in 2026 and 2027.
Bank of Canada:
1. In Scenario 1, it is assumed that the United States imposes a 10% tariff on imports of goods from China and China retaliates by an amount equivalent to a 10% increase in its weighted average tariff rate on imports of goods from the United States.
2. In Scenario 2, it is assumed that the United States imposes a 25% tariff on imports of goods from China and China retaliates by an amount equivalent to a 25% increase in its weighted average tariff rate on imports of goods from the United States.
Trump Signals Breakthrough in U.S.-Japan Trade Talks Amid Push to Counter China
President Donald Trump stated that significant progress was achieved during discussions with Japanese officials aiming to reach an agreement that would prevent increased tariffs on the United States trading partners. “What a great honor to meet with the Japanese delegation on trade. Big progress!” Trump shared an update on his social media platform on Wednesday following the meeting.. Treasury Secretary Scott Bessant has said Japan, a military ally, will be given priority as the U.S. seeks deals with countries that want to make their own deals. Bessant has said he envisions reaching an agreement with Japan and other U.S. partners to use a collective effort to put economic pressure on China.
Dollar Decline Erodes Foreign Investor Gains in U.S. Markets: $33 Trillion Exposed
From the perspective of foreign investors in US Treasuries, the dollar has fallen by about 8.5% since Trump was sworn in on January 20, which has already wiped out nearly two years of interest payments on the 10-year Treasury note that yielded 4.46% as of Friday. Stock markets have fared even worse and dollar returns are similarly disappointing, taking into account the dollar devaluation. There are $33 trillion of foreign investments in US markets. These are at a loss due to the dollar devaluation, let alone MTM losses on yield rise or stock price fall.
Global Trade in Flux: China Plans Fresh Stimulus as Europe Feels U.S. Trade Pressure
During the National People’s Congress held in March, China expanded its overall budget deficit to 8% of GDP, up from 6.6% in the previous year, as part of its stimulus efforts. In recent weeks, top officials have said the government has ample room for further fiscal easing. Since Q1 GDP exceeded expectations, China has some breathing room to prepare its next stimulus package.
Investor confidence in Germany’s economy has declined following US President Donald Trump’s trade measures, with the ZEW Institute’s expectations index falling to -14 in April from 51.6 the previous month.
U.S. Vice President JD Vance expressed optimism about the likelihood of a trade agreement between the United States and the United Kingdom, stating there is a “good chance” it will happen. Meanwhile, Ireland saw a 200% surge in exports to the U.S. in February, driven largely by medical and pharmaceutical products. The rise follows an 81% surge in January, indicating that US drug makers with Irish manufacturing hubs are stockpiling their products ahead of potential tariffs on the sector.
Conclusion and disclaimer
The content on MarkShala.com is intended for educational and informational purposes only. We specialize in writing blogs on financial planning, investment strategies, economic trends, and related topics. While we strive to provide accurate and reliable information, the content should not be taken as professional financial, investment, or legal advice.
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