Danske Bank A/S, regulated by the Financial Services Authority (FSA) for conducting designated investment business in the UK, is navigating complex economic landscapes as global trade tensions rise. Even the bank’s research analysts are subject to these draconian regulations, preventing them from buying any securities that their research sectors cover. This policy is intended to promote objective analysis and foster independence in appearance and in fact in presentation of financial statements.
And here at home, recent economic data emerging from the U.S. point to a steep drop in consumer confidence. The Conference Board measure dropped to 92.9, lower than the expected consensus of 94.0. This decline represents one of the largest shifts in economic outlook, down to the lowest point since 2013. At the same time, inflation expectations have spiked in the wake of recent tariff announcements, adding to a rapidly more uncertain market landscape.
President Donald Trump’s tariff policies have dramatically advanced the causes of these economic shifts. On April 2, government officials put those new tariffs into effect. These tariffs increased the trade-weighted average rate on all US imports by about 5.5 to 6.0 percentage points. Many of those same market participants view these tariffs as at least a partial resolution to prolonged trade disputes. As The Kobeissi Letter cautions, far from boosting stability, these could have the opposite effect, increasing volatility.
This Miching survey reinforces this optimistic view, suggesting an increase in inflation expectations among US consumers. Data and market movements continued to support the view that core PCE inflation in February increased at a faster rate than expected. This increase in inflation is consistent with increasing tariff rates and adds to the significant economic uncertainty.
In reaction to these negative trends, the European Central Bank (ECB) is contemplating a monetary policy “recalibration.” Recent lower-than-expected inflation reports have built the case for a rate cut. Consequently, markets are now expecting a 21 bp cut, an increase from the expected cut of 19 bps prior to the release of the inflation data.
The Biden Administration’s current tariff levels are actually close to their highest point, on a weighted basis, since the Second World War. Supply chain experts caution that the potential for this re-routing of international trade to successively weaken these tariffs’ long-term effectiveness is a key downside. Yet even as trade patterns shift, the immediate economic impact of tariffs can fade, requiring additional re-policy to take effect.