On Monday, United States President Donald Trump announced a big change in trade policy. This week, he threatened to impose a 10% tariff on all imported goods from eight countries in Europe. This decision will be implemented starting February 1st. In particular focus are Denmark, Sweden, France, Germany, the Netherlands, Finland, Great Britain and Norway. The tariffs are scheduled to increase to 25% on June 1st. This boost will find its way into the base budget only if talks to buy Greenland collapse.
Gold prices increased to an all-time high earlier today, around $4,690 per troy ounce. They finally came down to around $4,674. At the same time, the US Dollar Index (DXY) continues to hold around 99.00. Martin Luther King, Jr. Day – US markets are closed. Analysts anticipate tit-for-tat responses from the European Union (EU) and the UK, should Trump choose to impose tariffs.
Tariff Announcement and International Reactions
As the world’s two largest economic powers, the tariffs are but the latest sign of a deepening trade war between the US and EU. Trump’s desire to impose these tariffs is related to current negotiations about the island of Greenland, which, as you’ve probably heard, he’s expressed interest in purchasing. If an agreement is not reached by June, that could mean the full, higher tariff rate goes into effect.
The EU and UK have already prepared their own retaliatory measures against the US. This position would make it harder to move transatlantic trade relations in a positive direction. Officials from both the EU and UK are currently assessing their options and may introduce countermeasures that could impact a wide range of American goods.
Global markets responded creatively to this news. Advocates cautioned that the tariffs would lead to broader disruption of global trade relations, disproportionately affecting industries that have a strong reliance on exports. A new trade war could erupt at any moment. Both sides are preparing for an expected long-term economic fight.
Gold Prices Reach New Heights
Gold prices then jumped this morning, climbing over $4,690 per troy ounce, an amazing all-time high. Perhaps the most important development is the one making all the waves in the precious metals markets. The price right now is hovering around $4,674. This increase is driven by increased demand from central banks worldwide.
Temporarily peaking in November of 2022, central banks added the equivalence of just over 1,136 tonnes of gold to their reserves, a combined value of roughly $70 billion. This figure represents the largest yearly acquisition of gold on record. Meanwhile, China, India, and Turkey are leading the pack in increasing their gold reserves. This decision represents a smart pivot to safer assets in the face of these unprecedented economic times.
With geopolitical tensions rising around the world, investors are looking for stability. This search for peace of mind comes at the same time as skyrocketing prices on gold. In a climate of unpredictable global trade exacerbated by Trump’s tariff announcement, investors continue to flock to gold, often considered a safe-haven investment.
Upcoming Economic Indicators and Events
Going forward, the two biggest economic bells are expected this week. On Wednesday, the United Kingdom will come out with December CPI and PPI. Consider how much these reports could inform us of the earnings-related inflation trend and passenger rail investment’s role in our economy’s overall health.
Former President of the United States, Donald Trump, addressing the Davos Economic Forum, Switzerland. Coupled with this event on that very same day. As COP28 is a high-profile global leaders event it will capture huge global attention. Market participants would be hungry to hear his take on all the hot economic topics.
The US and UK S&P Global Purchasing Managers’ Index (PMIs) are due out today. This announcement will be at the very beginning of the American trading session. These indices are key indicators for measuring the health of manufacturing and economic performance as a whole in both countries.