After experiencing drops not seen since the 2020 Covid pandemic, US markets tried to recover some ground this week, with the S&P advancing 9.5% and the tech-heavy NASDAQ soaring 12.2% on Wednesday, as President Donald Trump announced a 90 day pause to his sweeping tariffs, excluding those on China.
Trump started the week doubling down on his tariffs, imposing rates such as 20% on the European Union and 32% on Taiwan, but excluding their semiconductors. The UK had only been hit with the standard 10% that was to be imposed on all imports. However, in a shock turn of events, Trump announced that all countries would be subject to the standard 10% until July, stepping away from an all-out trade war.
This decision was likely triggered by panic in the US bond market, although the White House of course denied this, saying that it was all part of the plan! The only country to still be slapped with tariffs above the standard level is China, with the overall rate now standing at 145%. China has reciprocated with their own tariff of 125%.
The UK had only been hit with the standard 10% that was to be imposed on all imports. However, in a shock turn of events, Trump announced that all countries would be subject to the standard 10% until July, stepping away from an all-out trade war.
Global markets still suffered, as although the tariffs have been lowered for now, the uncertainty has spooked investors. Central banks have also cited that the tariffs and volatility surrounding them is affecting growth forecasts and inflation, and therefore the anticipated trajectory of interest rates. The deputy governor for financial stability at the Bank of England, Sarah Breeden, has said that she would “expect tariffs to lower economic activity as barriers to trade inherently weigh on global demand.” She expanded “the answer on inflation is not clear-cut” as the consequences on exchange rate movements and supply chain disruptions are uncertain.
The deputy governor for financial stability at the Bank of England, Sarah Breeden, has said that she would “expect tariffs to lower economic activity as barriers to trade inherently weigh on global demand.”
Some good news at least for UK house buyers this week, Barclays have cut their mortgage rates off the back of changing interest rate expectations caused by the tariff uncertainty. Some smaller lenders cut their rates last week, but Barclays is the first major UK lender to do so for borrowers with a deposit of at least 40%. Swap rates, the measure by which lenders determine their fixed-rate deals, had increased their expectation of central bank rates cuts this year, but these have now softened since the announced pause. Traders expect three further rate cuts this year, compared to the one additional cut anticipated earlier in the year.
Our specialist's final thought
"Some good news at least for UK house buyers this week, Barclays have cut their mortgage rates off the back of changing interest rate expectations caused by the tariff uncertainty. Some smaller lenders cut their rates last week, but Barclays is the first major UK lender to do so for borrowers with a deposit of at least 40%."
