The latest wave of US trade restrictions took effect Wednesday as President Donald Trump’s tariffs on steel and aluminum imports officially kicked in. The 25% levies, imposed without exemptions, mark an aggressive escalation of his trade policies, putting pressure on key trading partners, including the European Union, Australia, South Korea, and Japan. The move is intended to revive the US industrial base but comes at the risk of exacerbating inflationary pressures and weighing on broader economic growth.
Market Reaction: Metals and Industries Brace for Higher Costs
Aluminum edged up 0.3% on the London Metal Exchange, while hot-rolled coil steel prices gained 0.4% in Shanghai as markets digested the impact of the tariffs. SARACEN MARKETS analysts anticipate that higher raw material costs will ripple through key sectors such as oil drilling, manufacturing, and consumer goods, with potential price hikes on automobiles, appliances, and even packaged food products. Meanwhile, the European Union responded swiftly, announcing countermeasures worth €26 billion ($28.3 billion) in tariffs on US goods.
Geopolitical Risks Add to Market Uncertainty
Global markets remain on edge amid ongoing geopolitical realignments and shifting trade policies. Just weeks after Trump’s sharp criticism of Ukrainian President Volodymyr Zelenskiy, Washington is now pressuring Moscow to accept a ceasefire agreement brokered in Saudi Arabia. The 30-day truce, negotiated by US and Ukrainian officials, awaits approval from Russian President Vladimir Putin. A resolution could offer temporary relief to market volatility, though broader risks persist.
Sticky Inflation Clouds Fed’s Rate Path
Market participants are also closely watching US inflation data due later Wednesday. SARACEN MARKETS forecasts the consumer price index (CPI) to have risen 0.3% in February, following a stronger-than-expected 0.5% increase in January. Persistent inflation raises concerns over the Federal Reserve’s ability to cut rates in the coming months, especially if economic growth begins to slow under the weight of protectionist policies.
Commodities Steady as Traders Weigh Supply and Demand Shifts
Oil prices extended gains as the US revised down its global supply forecast, signaling tighter market conditions. Gold remained firm, underpinned by haven demand amid ongoing macroeconomic and geopolitical uncertainties.
Key Question: Tariffs or the Fed, What Matters More for Markets in 2025?
With the Fed’s rate trajectory still uncertain and trade tensions mounting, investors are left wondering: will tariffs exert more influence on US markets than monetary policy this year? As inflation remains sticky and global tensions persist, the interplay between protectionism and central bank decision-making could be the defining market driver in the months ahead.