26 March 2025: The tariffs on steel and aluminium are already having an effect

Rachel Reeves will deliver her spring statement to the House of Commons later today. It is understood that not only will she put some meat on the bones of welfare cuts that were announced in broad terms last week, but she may also announce some fresh cuts.

Protests about service cuts are springing up all over the country as Labour voters express their dismay at what they feel is the Prime Minister’s betrayal. This is not what traditional Labour voters and young, first-time voters signed up for last July.

They believed that the days of austerity had ended with the Conservatives' departure. Instead, there have been tax increases and cuts to services and benefits for society's most vulnerable.

All the while, as Rachel Reeves has given herself seemingly impossible fiscal targets to meet, she is telling people that she has “no option” but to put the economy on a solid footing and that no one expected the journey to be easy.

Labour is taking full advantage of both its massive majority and the time that majority has afforded it.

The watershed for Labour's falling popularity came last October, but following last week's announcements of changes to welfare and today’s expected cuts to public spending, it may reach a new low.

All this is taking place against a backdrop of unrest on the Government’s backbenches, and Reform UK is seemingly on the verge of imploding despite the strides it has made in opinion polls in the run-up to May’s local council elections.

As Labour takes advantage of the time afforded to it, the Conservative Party is struggling to make any impression under its new leader, Kemi Badenoch. Rank-and-file Tory voters are still not convinced by her, and many hanker for the days of Boris Johnson, despite his obvious faults.

The effect of Donald Trump’s tariffs on British steel and aluminium exports is already being felt with a smelter in Scotland struggling to survive while producers in the UK’s “steel city,” Sheffield, are “feeling the pinch.”

One of the more radical possibilities that Reeves may be considering is the UK’s reentry into the single market and customs union. As a member of a Cabinet which is overtly pro-Europe, she sees membership as the single most important and obvious factor in driving growth in the economy.

As the Prime Minister grapples with thoughts of doing away with the tax on digital businesses, possibly to appease the U.S. President, it is doubtful that Trump will support a trade deal with a country that is figuratively moving closer to Brussels.

As the markets await today’s announcement, the pound experienced a modest rise yesterday, although traders remain concerned about an assault on the 1.30 level.

It climbed to a high of 1.2966 but drifted back to close at 1.2944.

The incredible gaffe that was exposed yesterday when senior members of the U.S. security services included a reporter in a chat group in which the planning for attacks on rebel groups in Yemen were discussed would, under any other President in living memory, be grounds for wholesale dismissals that would reach all the way to his No.2.

Under Donald Trump, what may be considered to be the most significant security breach in years has been simply labelled a glitch, while President Trump asked the press “what they expected?” after two months in office.

Were such an event to have taken place under the previous administration, Trump would be shouting from the rooftops, calling for impeachments and possible criminal charges.

The pressure on markets to accept that a recession is on the way, despite “hard” data predicting otherwise, is still being kept up to provide pressure on the Federal Reserve to loosen monetary policy.

Were a recession to be on the way, Americans have had lots of time to prepare.

Three years ago, as the economy recovered from the brief COVID-19 recession, even as inflation rose close to double figures, economists were already talking about another downturn. Russia had invaded Ukraine, and interest rates were rising.

Months passed, and no recession arrived, and Jerome Powell began considering if the United States would achieve a “soft landing,”

Now, recession fears have returned. President Trump’s campaign of import tariffs, among other factors, has shaken consumer confidence and spooked the stock market. However, there is speculation that Trump’s followers may be feeding those fears to drive interest rates down in what must be considered the most short-term policy decision ever.

The Fed considers the economy to be fairly well balanced at the moment, meaning that the risk of either a downturn or a spike in inflation are roughly equal. Trump appears not to recognize inflation fears, or if he does, he chooses to ignore them.

One telling statistic that possibly shows Trump’s hand in recession fears is a survey of top firms nationwide which put the chances of a recession at around 30% currently, although it has risen from 25% since January. However, Citibank, which supports Trump, sees the chances of a recession at 40%! A coincidence? Possibly.

Despite talk of an economic slowdown, Atlanta Federal Reserve President Raphael Bostic said he anticipates slower progress on inflation in the coming months and, as a result, now sees the Fed cutting its benchmark interest rate by only a quarter of a percentage point by the end of this year.

With less progress on inflation and businesses expected to add the cost of coming tariffs to their prices, "the appropriate path for policy is also going to be pushed back," Bostic said in an interview on Bloomberg.

The dollar index is in something of a state of flux currently, as longer-term investors seem unable to decide the future path of the economy.

The index lost ground yesterday, falling to a low of 103.94, but it recovered to close at 104.22.

The improvement in the Eurozone economy, which has been started by the news that Germany has “taken its collective foot off the brake”, has begun with manufacturers showing the confidence to increase production ahead of the expected flow of funds to Government funding into their sector of the economy.

While feelings were being expressed that growth in countries like Spain, Portugal, and Italy would see the region be able to grow substantially, without German help, the news that the new growth fund in Germany had passed the Upper House of the German Parliament has been greeted with a surge of enthusiasm.

However, consumers Eurozone-wide are not yet on board. Data published yesterday showed that consumer confidence is still falling.

The Eurozone consumer confidence index fell in March to -14.5 points from -13.6 points in its final reading in February.

The consensus of FactSet analysts expected a significantly higher reading of -12.9 points. It should be noted that this indicator averaged a reading of -10.57 points in the period from 1985 to 2025.

The preliminary reading for March is the lowest this indicator has reached since last December. It shows the deterioration of consumer confidence in the region, largely linked to the trade tension generated by the new US administration and its potential impact on growth and inflation in the Eurozone countries.

The fallout from the security breach in the U.S. could have significant consequences for the relationship between the Trump administration and the European Commission. It is often the case that politicians' true feelings on a matter are only made clear when they feel no one is watching.

With Trump seemingly in no mood to apologize for his Vice President’s comments, probably since he sees no upside, it may be that Brussels interprets his silence as tacit agreement.

The European Central Bank may lower its key rate at coming meetings, but possibly at a slower pace than previously, the head of the Bank of France said in an interview published yesterday.

Francois Villeroy de Galhau told a German newspaper yesterday that rate cuts are neither automatic nor likely to be at an end soon. Every monetary policy decision is taken concerning the latest economic data. He went on to say that he believes that there is scope for further easing, but the pace of rate cuts could slow.

Villeroy could not avoid tossing a barb at President Trump’s economic policies.

He told the newspaper that “The tragedy of Trump’s economic policy is that it turns a positive-sum game, which an open world economy represents, into a game where everyone loses," saying the result would apply first and foremost to the US itself.

The euro stabilized yesterday, although it still lost ground. The only positivity was that it did not make fresh lows for the current trend. It fell to a low of 1.0768 and closed at that level.

Have a great day!