At Any Rate
Global Rates: European rates and Tariff Top Trumps
Apr 4, 2025
This discussion delves into the unexpected impacts of recent US tariff announcements on the European rates market. Fluctuations in German yields signal rising recession risks, complicating economic forecasts. The widening of Boondester spreads is examined, highlighting fiscal policies and market sentiment. Additionally, the podcast explores how tariff influences shape intra-EMU spreads and inflation dynamics, reflecting the divergence between European and US inflation trends amidst global uncertainty.
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Quick takeaways
- The recent US tariff announcements have significantly raised recession fears, increasing the probability from 40% to 60%, affecting global demand.
- European rates markets are reacting strongly to tariff implications, with German yields dropping from 2.90% to 2.50% due to heightened growth risks.
Deep dives
Impact of US Tariffs on Global Markets
The recent announcements of US tariffs have taken the market by surprise, as their scale is larger than initially anticipated. These tariffs could raise the effective US tariff rate to approximately 23%, with European exports facing a 20% tariff and UK imports seeing a 10% tariff. The implications of these changes are significant, raising concerns about a global demand shock and increasing the probability of a global recession from 40% to 60%. This uncertainty has led to a review of macroeconomic forecasts, suggesting that growth risks in Europe are now weighted heavily to the downside.
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