100% tariffs on all Chinese imports to the US are scheduled to start on the 1st of November, even after Trump calls them unsustainable
Latest insights:
Trump acts to reassure markets
President Trump acted to calm markets on Friday, telling the Fox Business Network that 100% tariffs on China, due to be implemented on 1 November, were “not sustainable”. He added that he would meet President Xi at the end of October to try and iron out differences.
Trump’s latest tariff threat had spooked markets last week but his more conciliatory tone eased fears of a new trade war. While stock markets rallied in response, the dollar slid against the euro. Growing expectations of further rate cuts this year and the continuing US government shutdown weighed against the greenback.
The pound ended the week down slightly against the dollar and up slightly against the euro. However, sterling remains over 4% down against the euro over the past year.
Inflation is the UK’s Achilles heel
A further interest rate cut may boost the UK’s sluggish economy, but the International Monetary Fund (IMF) has urged the Bank of England (BoE) to proceed with caution. IMF forecasts suggest that UK inflation is likely to remain the highest in the G7 in 2026.
The BoE finds itself in a tricky position. With UK growth forecasts weakening ahead of Chancellor Rachel Reeves’ November budget, a rate cut could prove a shot in the arm. But inflationary pressures mean investors are lowering expectations of another cut before 2026. The current UK interest rate is 4%, well above the EU’s 2.15%.
Coming up:
As the 1 November deadline creeps closer, investors will keep a keen eye on developments in the US-China trade standoff. While the dispute centres on President Trump’s 100% tariff threats, new Chinese export controls on rare earth minerals threaten to have a significant impact on global growth.
Metrics of note this week include UK inflation data (Wednesday), the EU consumer confidence flash (Thursday), German manufacturing confidence, UK retail sales, US CPI and PMI (Friday).
