New US tariffs threaten to reignite inflation: Hargreaves Lansdown

According to Hargreaves Lansdown's latest market report, higher US tariffs on steel and aluminium threaten to fuel inflation, weighing on global growth, while markets keep a close eye on developments in Ukraine and oil prices.

Port of Long Beach, US

Port of Long Beach, US (Photo: Splash247 / Phaata)

Summary:

- Markets remain cautious as higher tariffs on steel and aluminium imports come into effect.

- US consumer price data takes centre stage amid concerns that trade policy will push prices higher.

- Hopes for a ceasefire rise after Ukraine-US talks in Saudi Arabia.

- Oil prices remain near six-month lows on concerns about slowing global growth and weakening energy demand.

Susannah Streeter, head of money and markets at Hargreaves Lansdown:

"As the ‘Trump bump’ has turned into a slump, investors are bracing for fresh volatility ahead. The impact of tariffs is front of mind, given broad 25% duties on imports of steel and aluminium have come into effect, with the risk of tit-for-tat retaliation high. China has already responded with higher duties on American goods and the EU is planning counter tariffs, which are expected to come into force in April. The disquiet evident among investors on Wall Street, spread to Asia, with the Nikkei flat and Chinese indices in the red. London’s FTSE 100 is set for a small rebound, buoyed by hopes for a ceasefire in Ukraine. The easing of geopolitical concerns will help improve sentiment to some extent, but investors will still be mulling the impact of tariffs on global growth and prospects for multinationals in an increasingly complex trading world. UK steel exporters are bracing for harsh winds to blow a storm through the industry, which has already been battered by higher energy costs, weaker demand, and over-supply on world markets."

Wall Street appears to be taking a breather after Tuesday's decline. But concerns remain, especially ahead of consumer inflation data due out. While the consumer price index (CPI) is expected to ease slightly from 3% to 2.9% in February, price pressures remain high. President Trump has pledged to quickly rein in inflation when he returns to the White House, but his tough trade policies risk pushing prices back up. With 25% tariffs on steel and aluminum imports in the US, production costs in many sectors, especially the auto and food industries, are set to rise. Rising egg prices are already a hot topic, but the cost of making a can of soda or a tin of beans could also become a concern. is the next focus. Manufacturers are unlikely to fully absorb these increased costs, and the auto industry risks facing a double whammy: higher production costs while consumers become more cautious, reluctant to spend on big-ticket items amid uncertainty. Stagflation — high inflation combined with slow growth — is back, raising the risk of a recession. The Atlanta Federal Reserve forecasts that US GDP could shrink by as much as 2.8% in the first quarter, although that figure could be revised as new data becomes available. Despite falling consumer confidence, nervous investors and frustrated CEOs, Mr. Trump has insisted that he will continue to maintain his policies, which could cause the US economy to continue struggling in the second quarter and increase the risk of a recession. Hopes for Ukraine Ceasefire and Oil Price Action

US-Ukraine relations have shown signs of improvement and a 30-day ceasefire is on the table. Talks in Saudi Arabia have put the onus on Russia to decide, with a deal to end the conflict on the table. If successful, the possibility of sanctions being lifted on Russia could increase, leading to more oil supplies from Russia. Oil prices have fallen as the supply outlook has improved, while concerns about the impact of Trump’s policies on global growth and energy demand persist. Brent crude has now fallen below $70 a barrel, hovering around a six-month low.

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