The Pound Sterling charts a stormy sea as U.S. President Donald Trump doubles, triples down on tariffs. So far, Trump has announced that the next round of tariffs will be effective April 2 and will be largely exception free. To him, the approach focuses on reciprocity. This strategy aims to correct trade imbalances. Despite commendable aims, it creates major market shocks already having profound effects on global currency trends.
Tariff developments will continue to dominate and dictate market sentiment in the short-term. All eyes will be on this Friday’s US Nonfarm Payrolls (NFP) data release. The current tariff levels are approaching historic highs that have not been seen since the Second World War. The British Pound received a short lived boost due to a tariff exemption on auto components. This was huge development which provided a glimmer of hope in that sea of darkness and inglorious turmoil.
Tariffs and Market Reactions
Trump’s tariff strategies have raised market sensitivity, with expected escalation in volatility as markets prepare for new pronouncements. The Kobeissi Letter on X indicated that while some perceive the April 2 tariffs as a potential conclusion to uncertainty, it foresees heightened volatility ahead. For context, Trump’s original policies have already raised the trade-weighted average US tariff rate on imports by a net total of about 5.5-6.0%-points.
Tariff exemptions—especially in auto parts—gave a short-term boost to markets, helping prop up the British Pound. Their relief could be temporary, with tariffs continuing to rise and putting downward pressure on GBP/USD performance. Over the last week, the Pound has weakened against the US Dollar. Yet, it has decidedly failed below the key 1.3000 level.
Economic Indicators in Focus
Now, all eyes turn to an important trifecta of economic indicators over the next week. On Tuesday, the US Institute for Supply Management (ISM) will be releasing its Manufacturing PMI report. Further, the new JOLTS Job Openings and Labor Turnover Survey will feed into gauging the economy’s health. Wednesday will bring the US Automatic Data Processing (ADP) Employment Change data, likely to continue framing market expectations.
Meanwhile, the big US labor market data release on Friday will likely be the capper for the week. The consequential Nonfarm Payrolls (NFP) figures are always key in this highly anticipated event. These figures will be watched carefully for signs of economic strength or weakness in the face of a trade war still raging.
Future Tariffs and Global Implications
Recent leaks reported by the Toronto Star revealed that Trump plans to roll out three levels of progressively higher tariffs. Canada should be able to look forward to these lower rates beginning April 2. It looks like the White House is willing to adjust its tariff game plan. It proposes to reduce or eliminate individual industry-specific tariffs and work towards reciprocal tariffs aimed at countries that enjoy large trade surpluses with the US.
Besides these unilateral measures Trump is getting ready to impose copper imports tariffs—which he could announce within weeks. This latest escalatory move threatens to deepen economic and geopolitical trade disruptions, heightening market uncertainty as all eyes on the broader economic effects.