Wall Street is pushing higher. After its early dip, the Dow Jones industrial average is now up 0.5%. The S&P 500 share index is now up 1.2%, while the tech-focused Nasdaq is 1.7% higher. Fox Business’s Charles Gasparino is reporting that people inside the Trump White House are alerting Wall Street executives they are nearing an agreement in principle on trade with India. The proposed deal could include “agreed upon goals” and a deadline for the fully-baked trade pact, according to Gasparino’s sources, and could be used as a template for a deal with Japan, South Korea and Australia. We should be cautious about leaping on encouraging trade rumours from the White House, of course. But also, why are Wall Street big hitters getting early tipoffs?! Germany’s government has given up hopes of growing its economy this year. Germany’s economy is expected to post zero growth in 2025, outgoing Economy Minister Robert Habeck said today, as he laid the blame for this stagnation on Donald Trump’s trade policy. Habeck declared: “The US trade policy of threatening and imposing tariffs has a direct impact on the German economy, which is very export-oriented.” The German government had previously expected growth of 0.3% this year. It’s new forecast, of 0% growth, matches the IMF’s new forecast, released on Tuesday. Consumer goods maker Procter & Gamble has cut its sales and profit forecast today, blaming a pullback in consumer behavior as uncertainty over tariffs and the economy hits confidence. P&G now expects flat sales for its current fiscal year after previously projecting growth of as much as four percent. The company also warned that it could be forced to raise prices – passing on the impact of tariffs on imports to its customers. CFO Andre Schulten told reporters on a call: “We will have to pull every lever we have in our arsenal to mitigate the impact of tariffs within our cost structure and P&L [profit and loss statement].” The Bank of England can learn lessons from the Covid-19 crisis about how to communicate issues around uncertainty, according to one of its top policymakers today. BoE deputy governor Claire Lombardelli argues that one of the biggest challenges facing the central bank – and the wider economics profession – is how to talk about economic uncertainty, and communicate with economic decision makers at businesses, households, and across the economy. Speaking at an event organised by the Peterson Institute for International Economics in Washington today, Lombardelli says the Bank is learning a lot of lessons, both from the economics profession and the academic literature, but also from a number of other disciplines. Lombardelli says: So we learnt a lot, for example, during Covid about communication and communication of uncertainty from health professionals and scientists. So I think there’s a real opportunity here for us to take those rigorous tools of economics and use them in a policy-making context that recognizes the uncertainty that we’re all trying to navigate through and helps economic agents navigate that uncertainty too. It’s a muted start to trading on Wall Street today. The Dow Jones industrial average has dropped by 0.4%, down 168 points to 39,437 points. It’s being dragged down by IBM, whose shares are down 8.5% after missing expectations with its latest financial results. But the broader S&P 500 index is up 0.24% at 5,388 points, up 12 points. Happily, trade war tensions have not led to a big increase in layoffs at US companies. The number of new claims for unemployment support rose by 6,000 last week to 222,000, new data shows, still a relatively low level. Q: What has been the mood of IMF members at this week’s Spring meeting? They are “anxious”, Kristalina Georgieva replies soberly, explaining: The membership is anxious because we were just about to step on the road to more stability after multiple shocks. Actually, she adds, the Fund had been worried that its forecast of 3.3% global growth this year was not high enough – before the Trump trade war forced it to cut that forecast eralier this week. Georgieva adds that IMF members are also recognizing the importance of “a rule based global economy” in which both government and the private sector can plan with some certainty. Turning to Argentina, Kristalina Georgieva says that the country has demonstrated that “this time it is different”, with a “decisiveness” to put the economy on a sound track. She cites falls in inflation, and a drop in poverty levels from over 50% to around 27% now. Georgieva says: It [poverty] is still very high, but going down. The state is stepping out from where it doesn’t belong, to allow more dynamism in the private sector. That’s quite an endorsement of Javier Milei’s harsh austerity measures, in which public spending was slashed in a “chainsaw” campaign of fiscal balance and deregulation. Asked about the outlook for Africa, Kristalina Georgieva says the continent has “so much to offer the world”. She explains: Obviously, they have the leaders, the natural resources, a young population. I think a more unified, more collaborative continent can go a long, long way to be an economic powerhouse. IMF chief Georgieva is then quizzed on why the Fund doesn’t believe the US will fall into a recession this year. Grabbing a bottle of Perrier, she fills her glass more than half-way up – to illustrate that the Fund sees a less than 40% risk of recession in America this year. She explains: My glass, when you look at it, it is more than 60% full. Well, that’s this is where we are. This is what it is. How can I call it empty? I can’t. When we look at the data, what we see is that for the United States, recession risks have increased now to 37%. We don’t see either in the labor market or indicators for the functions of the economy such a dramatic loss of economic activity that will push growth in United States all the way to below zero. Kristalina Georgieva also touches on yesterday’s stinging attack on the IMF by US Treasury secretary Scott Bessant. She says the Fund “greatly value” the voice of the US, who are its largest shareholder. During his speech yesterday, Bessent accused the IMF and World Bank of “mission creep”, and called on them to stop their “sprawling and unfocused agendas” on issues such as climate change and gender. Georgieva seems keen to sooth the US, saying she very much appreciated that Bessent reiterated the US’s commitment to the fund and to its role, saying: He raised a number of important issues and priorities for the institution that I look forward to discussing with us, authorities and the membership as a whole. Central bank independence is “critical” for their credibility, Kristalina Georgieva adds. She says central banks must strike a balance between supporting growth and containing inflation. To do so, they must not only adjust policy interest rates, but also rely on their credibility to anchor expectations, she points out. IMF chief Kristalina Georgieva is urging global leaders to resolve trade tensions rapidly. Speaking at a press conference to discuss her Global Policy Agenda, Georgieva warns that the world economy is facing “a new and major test”, at a time where its policy buffers are depleted after the shocks of recent years. That puts countries in a difficult position, Georgieva says, and also creates “urgency for action”. She says there are three “overarching priorities”, starting with ending the trade war that Donald Trump ignited this year. Georgieva says: First and most urgent [is] for countries to work constructively to resolve trade tensions as swiftly as possible, preserving openness and removing uncertainty. A trade policy settlement among the main players is essential, and we are urging them to do it swiftly, because uncertainty is very costly. Georgieva explains that businesses cannot invest if they do not have certainty, while households will save rather than spend. But in a nod of support to the White House, Georgieva says countries also need to address the imbalances that are fuelling today’s trade tensions. Some countries, like China, need to boost private consumption and embrace a shift to services. Others, like United States, need to reduce their fiscal deficit, she explains. Europe needs to complete the single market, banking union, capital market union, and remove internal barriers to intra EU trade, insists Georgieva (a former European commissioner herself). And all countries should seize this moment to lower their trade barriers, both tariff and non tariff, she added. Newsflash: the head of the International Monetary Fund is warning that trade war tensions could rock the stability of the world economy, and the International Monetary System. IMF managing director Kristalina Georgieva is releasing her latest global policy agenda now, which is aimed towards “anchoring stability and promoting balanced growth”. In it, Georgieva cautions that the economic landscape is “rapidly changing”, due to the US trade war, saying: Trade tensions have soared following the tariff announcements by the U.S. and responses to them, fueling a high level of uncertainty and market volatility, and threatening to stymie trade. These were in part driven by concerns about the uneven distribution of gains from economic integration, its impact on the international division of labor, supply chain security, and global imbalances. These trade tensions could test the economic and financial stability of individual countries and the world economy, and the resilience of the International Monetary System (IMS). The IMS is currently based around the idea that the US dollar is the global reserve currency, with the IMF sitting at the centre, and central banks around the world holding the system together. Over in Washington, UK chancellor Rachel Reeves is being interviewed by cable news channel Newsmax. She reiterating her confidence that a UK-US trade deal can be agreed. Update: Reeves told Newsmax: “We don’t always agree with the policy prescriptions and we’re seeking a deal that reduces the trade barriers between our countries.. “But I am confident that a deal can be done, that our strong relationship when it comes to defense, when it comes to security and when it comes to the economy and prosperity, means that we can strike a deal. Just in: Soft drinks and snacks group PepsiCo has abandoned hopes of growing its earnings this year, as new tariffs drive up its costs. In its latest financial results, PepsiCo told shareholders is now expects its core earnings per share to be “approximately even” this year, compared with 2024. It had previously expected mid-single-digit growth. Chairman and CEO Ramon Laguarta says PepsiCo are actively planning mitigation actions to address higher supply chain costs. Laguarta explains: “Our businesses remained resilient in the midst of increasingly dynamic and complex geopolitical and macroeconomic conditions in the first quarter. As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs. At the same time, consumer conditions in many markets remain subdued and similarly have an uncertain outlook.” UK companies have been hit by a drop in export orders this month, as the Trump tariffs depress global trade. The CBI’s latest monthly balance for export orders sank to -41 this month from -29 in March. That’s the weakest since December 2020 with the exception of November 2024, and shows that more companies reported a drop in export orders. Ben Jones, lead economist at the CBI, says: “The recent downturn in manufacturing output appears to have eased, but manufacturers still seem gloomy about their prospects amid rising costs, an expected decline in new orders and heighted uncertainty around global economic conditions. “The combination of financial pressures, market instability and falling confidence is leading manufacturers to cut back employment and investment, with plans for spending on buildings, equipment, innovation and training all taking a hit. “The wider geopolitical environment is becoming increasingly challenging for exporters, with export optimism falling sharply for a second successive quarter and export order volumes now hovering around post-pandemic lows. “The government is right to make the case for global free trade, with the Chancellor in Washington this week at the IMF spring meeting reaffirming that commitment. The uncertainty around global economic conditions only increases the importance of getting it right in domestic economic policy. Wall Street is on track to drop when trading resumes in New York. The Dow Jones industrial average is expected to drop by 0.7%, or around 250 points, according to the futures markets. Similar-sized losses are expected on the S&P 500 and the Nasdaq. There’s anxiety after Donald Trump indicated last night that his administration could reimpose tariffs it paused on 9 April within “the next two, three weeks” if countries haven’t struck a deal – rather than maintaining the current 90-day pause. Speaking at the White House, the US president said: “In the end, I think what’s going to happen is, we’re going to have a great deals, and by the way, if we don’t have a deal with a company or a country, we’re going to set the tariff. I’d say over the next couple of weeks, wouldn’t you say? I think so. Over the next two, three weeks.” Our US Politics Live blog has full details: China has picked up the olive branch proffered by Donald Trump earlier this week, and bashed the US president with it. He Yadong, the Chinese Ministry of Commerce’s spokesman, has told reporters today that the US should revoke all the unilateral tariffs recently imposed, and also insisted there has not been any progress towards a trade deal. He told a press briefing: “The US should respond to rational voices in the international community and within its own borders and thoroughly remove all unilateral tariffs imposed on China, if it really wants to solve the problem.” Reminder: on Tuesday, Trump said high tariffs on goods from China will “come down substantially. He, though, has dismissed speculation that progress has been made in bilateral communications, saying “any reports on development in talks are groundless.” The US dollar is weakening today, down around 0.5% against a basket of currencies, wiping out some of yesterday’s gains. The euro has climbed 0.7% to $1.1383, towards the three-year highs of $1.15 set at the start of this week. Deutsche Bank has revamped its medium-term FX forecasts yesterday, and are now predicting a “structural dollar downtrend.” George Saravelos, global head of FX research at Deutsche Bank, gives a four-point explaination: What has changed since the start of the year? The list of superlatives is long – the largest shift in US trade policy in a century; the biggest pivot in German fiscal policy since re-unification; the most significant reassessment of US geopolitical leadership since World War II, to name a few. Our view on all these factors is that the pre-conditions are now in place for the beginning of a major dollar downtrend. Our forecasts foresee the end of a “higher for longer” dollar with EUR/USD appreciating closer to purchasing power parity of 1.30 over the remainder of the decade. At the core of the dollar bear market are three assessments: a reduced desire by the rest of the world to fund growing twin deficits in the US; by extension, a peak and gradual unwind in elevated US asset holdings ; and a greater willingness to deploy domestic fiscal space to support growth and consumption outside of the US. In a world of extreme uncertainty and rapidly shifting policy norms, the risk of market dislocations and regime breaks remains high. The stock market turmoil triggered by Donald Trump’s tariff announcements also hurt the world’s largest sovereign wealth fund. Norway’s wealth fund posted a near-$40bn loss for the first quarter of this year, a return of -0.6% (or -415bn kroner), caused by losses on its tech stock investements. The fund’s manager, Nicolai Tangen, said the quarter has been characterized by “large fluctuations in the market”, adding: Equity investments yielded negative returns, and it was mainly technology stocks that dragged down the result. Growth across the eurozone is likely to peter out in the second half of this year, Goldman Schs has predicted. Goldman analysts say they expect euro area growth to slow further, with flat GDP in the second half of 2025, telling clients: First, the ongoing trade tensions are likely to weigh materially on activity via weaker net trade and investment, despite President Trump’s 90-day pause on the country-specific reciprocal tariffs. Second, we expect weaker global growth to weigh on exports, given recent downgrades by our US and China teams. Third, financial conditions—with our Euro area FCI [financial conditions index] 50bp tighter since early March—point to a building headwind. Goldman predict eurozone growth of 0.7% in 2025 and 1% in 2026, which they add is “notably” below consensus, the ECB March staff projections and the latest IMF forecasts. Donald Trump’s tariffs will make it harder for Sir Jim Ratcliffe’s car division, Ineos Automotive, to reach its first profit. Ineos Automotive’s CEO, Lynn Calder, told Bloomberg that the US president’s 25% tariff on foreign cars will make it harder to hit the earnings target. Calder said: “For sure, this last week has put a dent in that and, for sure, delayed it,” Calder insisted, though, that Ratcliffe is still “absolutely, 100%” committed to cars, adding: “We’re stubborn as mules. We’re not easy to knock down.” The threat of a US trade war has driven UK consumer confidence down to its lowest level on record, the British Retail Consortium reports today. Its latest healthcheck on shoppers found that people were much more negative about the state of the UK economy, and of their own financial situation. The survey was conducted between the 4th and the 7th April, which covers the period immediately after Donald Trump announced new tariffs on US trading partners. It rather bolsters Andrew Bailey’s warning that the US trade war will hurt UK growth (see opening post). Helen Dickinson, chief executive of the British Retail Consortium, says: “With fieldwork completed just days after Donald Trump’s “Liberation Day” tariffs, it is unsurprising that consumer expectations for the economy plummeted to a record low. The original tariff schedule, since reduced for most countries, was expected to reduce growth in the UK and elsewhere. Yet despite this economic pessimism, expectations of retail spending rose slightly as the prospect of Easter shopping drew closer. Here’s the details: The state of the economy dropped significantly to -48 in April, down from -35 in March. Their personal financial situation worsened to -16 in April, down from -10 in March. Their personal spending on retail rose to +3 in April, up from 0 in March. Their personal spending overall fell slightly to +10 in April, down from +11 in March. Their personal saving rose slightly to -4 in April, up from -5 in March. The survey does not catch the reaction to Trump’s decision on 9 April to pause most tariffs for 90 days. Dickinson warns, though, that confidence is still weak despite that u-turn: “Even with a pause on many of the US tariffs, business and consumer confidence remains fragile. The risk of higher global prices is an unwanted addition to the £7bn in new costs hitting retailers this year from higher employer National Insurance, increased NLW, and a new packaging tax. Many retailers are also concerned about the risk of cheap Chinese products being diverted from the US to other destinations, including the UK. The London stock market has opened to little fanfare. After rallying yesterday to a near three-week high, the FTSE 100 has risen by just 2 points (or 0.03%) to 8405 points. UK brokerage AJ Bell has benefitted from recent market turbulence. It reports that there has been increased trading activity in April as customers respond to “changing market dynamics”, typically by snapping up shares whose values fell. AJ Bell told the City: The long-term investment outlook among customers is illustrated by the fact more than three-quarters of these trades were buys with the net investment totalling more than £300 million. Several UK-listed companies are telling investors this morning that they don’t expect major damage from the US’s new trade war. Unilever, the consumer goods giant, told the City that it expects a “limited and manageable” hit to its earnings from tariffs. Unilever, which owns Marmite, Dove and several ice cream brands, said it was sticking to its targets for 2025, but added: The direct impact of tariffs on our profitability is expected to be limited and manageable. All this being said, we are conscious that the macroeconomic environment, currency stability and consumer sentiment remain uncertain and we will be agile in adjusting our plans as necessary. Pizza maker Domino’s told shareholders that its initial assessment of newly introduced tariffs shows “minimal direct impact”, adding: We continue to assess any indirect impacts on our supply chain, monitor the broader environment going forward and our full year expectations remain unchanged.” Engineering firm Senior, which makes high technology components and systems, is taking a similar line. It told investors this morning: The direct impact of announced tariffs is limited and manageable. We remain mindful of the potential broader macroeconomic impact on the market sectors in which we operate and will continue to monitor the situation and respond appropriately. There are signs that some investors are looking to move money out of US assets and into Europe instead, fund manager Jupiter says this morning. Jupiter told shareholders that there was “elevated market volatility” across asset classes in April “as a result of trade policies” (a reference to the crash, and partial rebound, after Trump’s ‘Liberation Day’ tariff announcement). Jupiter says this will “undoubtedly have an impact on client risk appetite”, adding: We also see early-stage evidence of asset owners and other investors looking to reallocate away from the US and towards other markets, such as the UK, Europe and Asia Pacific. Volatility isn’t all bad, though – Jupiter reckon mispriced assets present an opportunity for active asset managers. It also reported a £1bn drop in assets under management in the last quarter, to £44.3bn, driven by net outflows of £500m and negative market movements of £500m. Donald Trump’s tariff flip-flopping is continuing this week, with reports that the US president is planning to spare carmakers from some of his most onerous tariffs. According to the Financial Times, the US is now planning to exempt car parts from the tariffs that Trump is imposing on imports from China to counter its role in fentanyl chemical exports, as well from those levied on steel and aluminium The u-turn comes after intense lobbying by industry executives over recent weeks, who have been warning the White House about the damage that tariffs will cause But it won’t spare the car industry completely from Trump’s trade war. As the FT explains: The exemptions would leave in place a 25 per cent tariff Trump imposed on all imports of foreign-made cars. A separate 25 per cent levy on parts would also remain and is due to take effect from May 3. More here (£). ACEA’s latest European car sales report shows a continued decline in demand for fossil fuel-powered vehicles. While new battery-electric car sales grew by 23.9% in the first three months of 2025, to 412,997 units, petrol car registrations saw a significant decline of 20.6%, with all major markets showing decreases. France experienced the steepest drop, ACEA reports, with petrol registrations plummeting by 34.1%, followed by Germany (-26.6%), Italy (-15.8%), and Spain (-9.5%). The diesel car market declined by 27.1%. Tesla’s share of the European car market has dropped again, following protests against the car maker’s CEO, Elon Musk. Tesla’s market share in the European Union, the UK and the EFTA trade zone (Iceland, Liechtenstein, Norway, and Switzerland) fell to 2% in March, down from 2.9% in March 2024. Total sales in the month fell to 28,502, down from 39,684 a year ago, new data from the European Automobile Manufacturers’ Association (ACEA) this morning show. During 2025 so far, Tesla’s market share in the EU/UK/EFTA has dropped to 1.6%, from 2.5% in January-March 2024. Its sales are down 37%, to 54,020 from 86,027 in Q1 2024. That’s despite a near-24% increase in overall battery-electric car sales in Europe so far this year. Overall, car sales across Europe dipped by 0.2% in March, and are down 1.9% so far this year. Earlier this week, Tesla reported a sharp tumble in profits and revenues in the first quarter of 2025 amid a backlash against his role in the Trump White House, where he has been driving cutbacks to federal services. Protests against Musk, and Tesla, have been taking place in the US and across Europe in recent weeks, prompting reports of a European consumer backlash by some Tesla owners and prospective buyers. Tesla’s recent sales decline has also been blamed on its ageing lineup of models (its Model Y has just been updated) and intense competition from rivals such as China’s BYD, as well as the backlash from Musk’s embrace of rightwing politics. Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. Fears are mounting that Donald Trump’s trade war will hurt the UK economy, even as the US president backtracks over some of his tougher measures. Even though Britain is getting off relatively lightly with a 10% tariff, new trade disruption is likely to damage economic growth. Andrew Bailey, the governor of the Bank of England, sounded the alarm in Washington last night, where the International Monetary Fund’s Spring Meeting is taking place. Bailey told an Institute of International Finance event that the UK’s open economy was vulnerable to a global trade war. Bailey explained: “It’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters so because the UK is such an open economy. “We have to take very seriously the risk to growth. I’ve said a number of times, fragmenting the world economy will be bad for growth.” The Bank will release its latest economic forecasts in two weeks, when it is widely expected to cut UK interest rates. Earlier this week the IMF cut its forecast for UK growth this year to 1.1%, down from 1.6% predicted in January The UK government has been pushing for a trade deal with the US. But on Wednesday, chancellor Rachel Reeves dashed hopes of an early breakthrough in negotiations, stressing that the UK is “not going to rush” into a deal. Financial markets rallied yesterday after Trump said his tariffs on China would come down “substantially”, but not to zero. These hints that the US might de-escalate tensions with Beijing are lifting the “mood music” in the markets, reports Michael Brown, senior research strategist at brokerage Pepperstone. Brown adds: Isn’t it remarkable how the ‘Art of the Deal’ appears to simply be for Trump to negotiate with himself (aka fold like a cheap suit), then to end up jumping around claiming a ‘win’ anyway. The agenda 9am BST: IFO survey of Germany’s business climate 11am BST: CBI’s industrial trends survey of UK manufacturing 1pm BST: IMF to release Global Policy Agenda report 1.30pm BST: US weekly jobless claims data 1.30pm BST: US durable goods orders
Author: Graeme Wearden