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The US dollar has fallen to six-month lows against the euro, yen, and Swiss franc following President Trump's announcement of new import tariffs, including a 10% levy on all US imports. This move has raised concerns over global economic growth, leading to market declines as investors seek safer assets like bonds and gold. Despite stable labor market data, the tariffs have contributed to a slowdown in the services sector, with analysts warning of potential economic stagnation and inflationary pressures.
Japanese stocks are poised for their largest weekly decline since 2020 amid tariff concerns, as Gulf Cooperation Council nations face a 10% US tariff under Trump's new trade policy. While oil exports remain exempt, sectors like aluminum and petrochemicals may suffer from rising costs and supply chain disruptions. Regional equity markets reacted negatively, with significant declines in the UAE, while Qatar's indices showed resilience, reflecting its diversified economic positioning.
Bank of Japan Governor Ueda warned that U.S. tariffs could negatively impact Japan's economy, affecting both global and domestic growth. While corporate sentiment remains positive, recent data show mixed economic signals, with inflation pressures rising amid escalating trade tensions. The BOJ is prepared to adjust monetary policy based on these developments, with interest rate hikes possible if inflation remains sustained.
JPMorgan analysts have raised the risk of a global recession to 60% following President Trump's announcement of sweeping tariffs, which they describe as a significant tax increase on US imports. The tariffs, affecting numerous countries, could lead to higher consumer prices and economic disruption. While the potential for recession exists, the economists note that the US economy remains fundamentally strong and may withstand the shock if policies change.
Recent tariff announcements from President Trump have raised concerns on Wall Street, with UBS warning that sustained tariffs could increase the average tariff rate on U.S. imports from 2.5% to 24%, potentially shrinking the economy by 1.5% to 2% by 2025 and pushing inflation to 5%. Bank of America analysts predict that retaliatory tariffs could slash S&P 500 earnings by 32%, while even without retaliation, higher import prices could reduce earnings by 5%. This combination of slower growth and rising inflation poses a risk of stagflation, complicating the Federal Reserve's interest rate decisions.
The stock market faced a significant downturn following President Trump's announcement of severe tariffs affecting over 180 countries, with the S&P 500 dropping nearly 4% and the Nasdaq Composite falling 5%. Major banks like JPMorgan Chase, Wells Fargo, and Citigroup experienced sharp declines, with Citigroup suffering a more than 10% drop due to its international exposure. The long-term impact of these tariffs on bank profitability remains uncertain, as they could lead to increased consumer prices, reduced loan demand, and higher loan defaults.
Morgan Stanley and UBS are at odds over Federal Reserve interest rate predictions amid rising stagflation concerns due to President Trump's tariffs. UBS anticipates up to four rate cuts this year, while Morgan Stanley believes the Fed will hold off on cuts until next year, highlighting the complex economic landscape. Market sentiment currently leans towards rate reductions, with traders betting on multiple cuts despite inflation worries.
Recent tariff announcements from President Trump have raised significant concerns on Wall Street regarding their potential impact on the economy and corporate earnings. UBS' Tariff Fear gauge indicates that investor awareness of these risks has decreased, dropping from 30% in March to 11% in April. Strategist Bhanu Baweja warns that if current policies persist, the average tariff rate on U.S. imports could soar from 2.5% to 24%, potentially shrinking the U.S. economy by 1.5% to 2% by 2025.
Mark Haefele, chief investment officer at UBS Global Wealth Management, believes the Federal Reserve will need to cut interest rates aggressively, potentially four times this year, due to new tariffs from President Trump. In contrast, Michael Gapen, Morgan Stanley’s chief US economist, argues that the Fed should not cut rates at all, revising their predictions to suggest no reductions until next year.
UBS analyst Amit Mehrotra has warned that the recently announced tariffs by the Trump administration could act as a significant financial burden on consumers, likening it to a $700 billion tax. This move is expected to severely diminish consumer demand.
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