The week ahead 07 April 2025 - Stock markets tumble on ‘Liberation Day’
What to watch out for in the UK economy and property market this week.
Equity indices around the world tumbled last week as the Trump administration announced increased tariffs on foreign goods. The US benchmark shares index, the S&P 500, closed on Thursday down by 5.2%, wiping US$2.5 trillion (the equivalent of the GDP of Italy) off the value of the underlying companies. In the UK, the FTSE 100 index of leading companies declined by 2.2% in the week to Thursday, with the downwards pressure probably moderated by news Britain was not one of the countries facing a punitive higher tariff level. On Friday, China retaliated with an additional 34% tariff on US goods.
Time is needed to gauge the full impact, although the additional uncertainty is poorly timed given the UK economy is currently in a slowdown. There is the possibility that goods previously destined for the US market now arrive in Britain, and it is hard to say whether the upside of cheap goods bringing down inflation might be outweighed by UK firms finding themselves unable to compete with a surge of discounted foreign product. The UK government could find itself under pressure to bring in tariffs to stop this ‘dumping’ of goods here, which could then spark retaliation tariffs against British exports. Hence the widespread talk of a global trade war.
The Trump White House has said these tariffs are a starting point that can be negotiated down; while the UK government says talks on a trade agreement with Washington are advancing.
Looking to the medium- to long-term, there is even reason for some optimism from a British perspective. The US retreat into isolationism, both in trade and geopolitics, puts the UK in a good position to perhaps renegotiate its trade agreement with the EU to allow freer commerce. While a more active role for Britain in European defence could lead to arms, aerospace and component sales that would have previously gone to the US, which will benefit the UK manufacturing sector.
This week sees the release of monthly GDP figures for the UK. Presently, the various sub-sectors of the UK economy are seeing volatile levels of activity, which makes forecasting difficult. The most recent retail sales data was stronger than expected, so that may have lifted the February GDP figures into positive territory, following the modest contraction reported for January. Nevertheless, most other data continues to point to sluggish conditions for the UK economy, so at best we might see modest growth.
