Tariffs paused once again, but markets shrugged
On Thursday, U.S. President Trump confirmed that USMCA-exempt goods (those covered by the United States-Mexico-Canada Agreement) will avoid the 25% tariff, offering a reprieve for Mexico and Canada. However, the tariff pause is only in place until April 2, when Trump is expected to unveil a broader trade policy overhaul, including sector-specific duties. Markets barely moved on the news; investors seem exhausted by the ongoing tariff theatre. Meanwhile, U.S. economic data remained weak, as a jump in layoffs — driven largely by government cuts — added to recession fears. The Federal Reserve Bank of Atlanta’s GDPNow model revised Q1 growth to -2.4%, still firmly in contraction territory. The model had pointed towards 2.8% growth in mid-January.
Over in Europe, the European Central Bank cut rates for the sixth straight time, a move that was widely expected. European stocks continued to defy global weakness, driven by record government spending, particularly in defence. Germany’s stock market is now up 20% this year, outperforming most major indices. Trump’s stance that Europe must fund its own defence has led to a surge in military budgets across the continent, forcing governments to issue massive amounts of new debt. Ironically, this wave of fiscal stimulus is boosting the euro, which hit a four-month high against the dollar and is on track for one of its strongest weekly performances since its creation.
Meanwhile, after teasing it earlier in the week, Trump officially signed an executive order creating a Strategic Bitcoin Reserve, a landmark move in U.S. digital asset policy. But crypto markets weren’t thrilled, as instead of buying Bitcoin outright, the reserve will be funded solely through seized assets from criminal and civil forfeitures (which will ensure that no taxpayer funds are involved). Traders had hoped for a more aggressive stance, and the price action reflected the disappointment.
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