Introduction: Asian stocks fall after tariffs reinstated
News that a federal court had blocked most of Donald Trump’s sweeping trade tariffs helped stock markets rise yesterday. But now that an appeals court has agreed to a temporary pause in the decision, stocks are starting to fall again.
In Tokyo, the Nikkei index dropped 1.1%, while Hong Kong’s Hang Seng fell 1.5%. The mainland Chinese index the SSE Composite fell 0.3%, while South Korea’s Kospi fell 0.9%.
The US dollar has been shaky too, and is now heading for its fifth consecutive monthly decline as investors brace for more uncertainty around trade.
Trump said on Thursday he hoped the Supreme Court would overturn the trade court’s decision, while White House officials have suggested he could pursue other presidential powers to make sure that tariffs take effect.
Despite the uncertainty around Trump’s tariff regime, the White House says that negotiations with its top trading partners continue. Treasury Secretary Scott Bessent said in an interview with Fox News that he is scheduled to have talks with a high-level Japanese delegation later on Friday in Washington.
Trump had already paused his “Liberation Day” tariff rates on most trade partners for 90 days to July 9 and set a baseline rate of 10% in the meantime while they negotiate new deals.
Earlier this month the US and the UK confirmed they had agreed a trade deal, but no legal text exists yet to bring the concessions into force. The UK has said it wants to accelerate negotiations to conclude the deal with the US. The business secretary, Jonathan Reynolds, is expected to meet US commerce secretary Howard Lutnick at a meeting of the OECD in Paris next Tuesday.
The agenda
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1PM BST: German inflation data
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1:30PM BST: US PCE (Inflation measure)
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3PM BST: University of Michigan’s consumer sentiment survey
Key events
Investors will be watching Germany closely today as they await inflation data from Europe’s biggest economy this afternoon.
In the meantime, new figures this morning show that German retail sales fell by 1.1% in April compared with the previous month. That compares with an expected 0.2% increase, according to a poll of analysts by Reuters.
The German 10-year government bond yield, the benchmark for the euro area, is down one basis point at 2.504%, its lowest point in three weeks.
Bank of England policymaker dismisses inflation concerns
Closer to home, a member of the Bank of England’s monetary policy committee (MPC) has played down inflation risk and renewed his call for lower interest rates in Britain.
Speaking to the Financial Times, Alan Taylor said the current rise in inflation is being driven by one-off factors and stressed the potential negative impact that Trump’s trade war could have on economic growth.
Taylor last voted for a half-point reduction in interest rates this month. When asked whether he would back a rate cut at the next meeting in June, he told the FT:
I’m not going to pre-emptively announce my vote, but I think I indicated in my dissent that I thought we needed to be on a lower [monetary] policy path.
I’m seeing more risk piling up on the downside scenario because of global developments…[the impact of Trump’s tariffs on imports would] be building up over the rest of this year in terms of trade diversion and drag on growth.
Earlier this month the MPC lowered rates by 25 basis points to 4.25%, taking it to the lowest level since 2023.
Taylor told the FT that while inflation had been “very strong” in April, the 3.5% reading was heavily affected by anticipated rises such as the energy price cap and regulated water bills. He said:
[The BoE] forecast path is saying there is going to be an inflation hump and then it’s going to go away….[Higher inflation] is not coming from demand and supply pressures; for the most part, it’s coming out of one-time tax and administered price changes.
Peter Navarro says Trump will find a way to impose tariffs
Trump’s chief adviser told reporters last night that the administration will “respond forcefully” to the US trade court’s ruling on the tariffs and that it plans to “fight this all the way up the chain”.
Speaking outside the White House, he said:
You can assume even if we lose, we will do it another way.
Introduction: Asian stocks fall after tariffs reinstated
News that a federal court had blocked most of Donald Trump’s sweeping trade tariffs helped stock markets rise yesterday. But now that an appeals court has agreed to a temporary pause in the decision, stocks are starting to fall again.
In Tokyo, the Nikkei index dropped 1.1%, while Hong Kong’s Hang Seng fell 1.5%. The mainland Chinese index the SSE Composite fell 0.3%, while South Korea’s Kospi fell 0.9%.
The US dollar has been shaky too, and is now heading for its fifth consecutive monthly decline as investors brace for more uncertainty around trade.
Trump said on Thursday he hoped the Supreme Court would overturn the trade court’s decision, while White House officials have suggested he could pursue other presidential powers to make sure that tariffs take effect.
Despite the uncertainty around Trump’s tariff regime, the White House says that negotiations with its top trading partners continue. Treasury Secretary Scott Bessent said in an interview with Fox News that he is scheduled to have talks with a high-level Japanese delegation later on Friday in Washington.
Trump had already paused his “Liberation Day” tariff rates on most trade partners for 90 days to July 9 and set a baseline rate of 10% in the meantime while they negotiate new deals.
Earlier this month the US and the UK confirmed they had agreed a trade deal, but no legal text exists yet to bring the concessions into force. The UK has said it wants to accelerate negotiations to conclude the deal with the US. The business secretary, Jonathan Reynolds, is expected to meet US commerce secretary Howard Lutnick at a meeting of the OECD in Paris next Tuesday.
The agenda
-
1PM BST: German inflation data
-
1:30PM BST: US PCE (Inflation measure)
-
3PM BST: University of Michigan’s consumer sentiment survey