Leading Indicators | Trump’s tariffs: no liberation from uncertainty
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Trump’s tariffs: the UK fares relatively better with the minimum 10% rate, but shockwaves sent through global markets
Last week, Trump revealed plans to enforce a minimum 10% tariff on all goods entering the US, with steeper rates for roughly 60 countries in an effort to curb trade imbalances. Among those affected are key trading partners such as China, where some goods will now face tariffs exceeding 50% - along with the European Union, Vietnam, and Japan. All UK goods entering the US will now be subject to a flat 10% tariff, the lowest rate imposed on any G7 economy.
Fear gauge fluctuates amid renewed trade uncertainty
Trump’s tariff announcements have escalated global trade tensions, triggering a broad reassessment of risk across financial markets. The CBOE VIX volatility index, also known as the ‘investor fear gauge’, surged above 60, its highest level since August 2024. While it has since decreased to 40.7, it remains roughly twice above the long-term average as the impact of the tariffs continues to unfold and equity markets fluctuate.
Swap rates trending down – UK trend aligned with Europe even though tracking level of US
The UK 5-year SONIA swap rate remains under 4%, currently at 3.77%, down -18bps over the week, albeit c.10bps up from the intra-week low that followed the tariff announcements. Markets are now pricing in three quarter-point rate cuts from the Bank of England. Investors are closely assessing the balance between economic growth and inflation, weighing the impact of lower oil prices against the effects of tariffs. Swap rates are expected to stay relatively volatile.
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