Over the last few months, the US labour market has proven extremely resilient, with unemployment rate falling to a multidecade low of 6.1%. However, this positive development comes against a backdrop of weakening labour demand, as indicated by the Purchasing Managers’ Index (PMI). At the same time, an explosion of geopolitical tensions and threats of new tariffs are roiling the economic waters, affecting inflation expectations and market forecasts.
Though this is positive in light of the unemployment decrease, the PMI has shown a decrease in labour demand in multiple sectors. Beyond the implications for lasting job creation, this heralds broader destabilizing effects for economy as a whole. In this context, analysts are understandably excited that the unemployment number is so positive. It could end up masking some of the more insidious problems in the labor market.
US President Donald Trump has tweeted a major threat against Russia. Through the lens of international relations, he is speaking to the idea of imposing secondary tariffs on oil. His articulated intention has always been crystal clear — tariffs will be placed. This would only occur if Russia refuses to sign a ceasefire agreement. This diplomatic maneuver highlights the acute geopolitical minefields characterizing today’s global energy markets—and what those tensions mean for global trade at large.
Even as inflation expectations have increased, concerns about slower growth are the major theme driving markets today. Markets are anticipating the Federal Reserve to execute a rate cut by June at the latest. They project a higher long-run level of 4% to 4.25%. This second change in both directions is a pragmatic move that recognizes the political tightrope policymakers must walk, balancing inflationary pressures and the need for ongoing economic stimulus.
The second big factor that’s been holding down the US economy lately is a huge deceleration in immigration flows. This decline will slow the growth of the overall US labor supply. Consequently, it has the potential to be quite harmful for job creation and economic prosperity. The recent drop off of immigrants at a time when many sectors are already facing critical labour shortages could make employment prospects even more grim.
Across the Atlantic, eurozone inflation has further cooled towards the European Central Bank’s 2% target. This development could not be more opposite to what’s going on with inflation in the US. Increased hopes on this front might herald a rougher economic ride. The inflation trends in these two complementary regions have diverged sharply. As a result, this contrast highlights different economic situations that would have an outsized effect on transatlantic trade.
In recent weeks, President Trump has further flared trade tensions by pursuing new rounds of tariffs against a number of countries. Fifth, a 20% tariff was added to all imports from China. On top of that, a 25% tariff is aimed at any goods coming in from Canada and Mexico that aren’t part of the USMCA agreement. These actions point to a hawkish approach toward global trade relations and are indicative of continued fights over trade deficits.
As you know, President Trump announced a 25% tariff on steel imports and a 10% tariff on aluminum imports. A similar countywide levy on automobiles will go into effect on April 2. These tariffs are part of a broader strategy to protect domestic industries and bolster American manufacturing, but they risk retaliation from affected trading partners.
Compounding these trade concerns is a US-China feud that’s threatening one of the most important trade secrets of all, the Panama Canal. A new spat has emerged, this time featuring China’s role in blocking the sale of two ports by Hong Kong-based CK Hutchison. The buyer is an investor group led by US-based Blackrock. These moves show the intricacies and implications of the US-China relationship and the possibility of even greater economic consequences due to these tumultuous ties.
President Trump is expected to announce reciprocal tariffs on Monday, April 2. The business community as well as businesses are preparing for potential realignments to global trade flows. These tariffs would transform pricing and procurement landscapes, adding significant complexity around supply chain decisions, increasing risk for businesses that depend on predictable international trade.