United States: Trade Tariffs and Economic Data Take Center Stage

The coming week is set to be pivotal for the US, with potential trade tariffs on imports from China, Mexico, and Canada coming into effect. Additionally, crucial economic data releases, including the February jobs report, will provide insight into the country’s economic trajectory.

Trade Tariffs Set to Begin

President Trump has announced that new tariffs are expected to take effect on 4 March, although the exact timing has been subject to change. He argues that a stronger US dollar will offset any price impact on consumers while reducing the purchasing power of foreign trading partners. However, past experiences—such as the 2018 washing machine tariffs—suggest that consumers will likely face higher prices.

Adding to concerns, consumer confidence is already weakening due to worries about spending power and government austerity measures. The introduction of new tariffs may further dampen sentiment, making households more cautious about their spending.

Key Economic Data Releases

• ISM Reports: The latest Institute for Supply Management (ISM) surveys are expected to reinforce the view that economic growth remains sluggish in early 2025. Regional manufacturing surveys suggest a slight pull-back in the national index, while service sector data may also show weakness based on trends seen in other business surveys.
  
• February Jobs Report: The employment report is likely to reflect continued caution among businesses, especially as the US reviews its trade agreements. Job growth may remain subdued, with federal government job cuts still expected to take a few more months before showing up in the data.

Eurozone: Interest Rate Decisions and Labour Market Trends

The European Central Bank (ECB) will take centre stage next week, with its interest rate decision on Thursday and the latest unemployment data providing further insights into the economic outlook.

ECB Interest Rate Decision (Thursday)

The ECB is widely expected to cut interest rates by 0.25%, but the debate over the “terminal rate”—the lowest rate before tightening begins—remains a hot topic. Inflation could see a brief uptick in February before easing again, but the presence of more hawkish voices on the ECB’s governing council suggests a lively discussion over future rate policy.

Unemployment Data (Tuesday)

The eurozone’s unemployment rate remains at a record low of 6.3%, even though recent PMI (Purchasing Managers’ Index) surveys indicate businesses have started cutting jobs. While the labour market tends to react slowly to economic shifts, any signs of rising unemployment could influence how far the ECB is willing to push rates lower in the coming months.

Final Thoughts

With US trade policies in flux and European monetary policy at a crossroads, the week ahead promises to be eventful for global markets. Investors and policymakers alike will be watching these developments closely, as their impact could shape economic trends for months to come.