1. Deals, disputes and (some) diplomacy
In response to U.S. President Trump’s tariffs on imports from Mexico, Canada, and China, global equity and currency markets experienced significant volatility. Short-term resolutions emerged with Mexico’s President Claudia Sheinbaum and Canada’s outgoing Prime Minister Justin Trudeau. Trump agreed to suspend tariffs on Canada and Mexico for 30 days after both countries committed to enhancing border security and combating drug trafficking. Sheinbaum also persuaded Trump to address the cross-border flow of high-powered weapons into Mexico, suggesting that the tariffs serve more as a negotiating tool than permanent trade barriers.
In contrast, China, under President Xi Jinping, adopted a more combative stance. Beijing retaliated by imposing tariffs on U.S. coal, liquefied natural gas, crude oil, and large vehicles. Additionally, China launched an antitrust investigation into Google and imposed export controls on critical minerals, signalling its reluctance to concede to U.S. demands. This response indicates the likelihood of a prolonged standoff between the two global powers.
2. AI revolution or rule-breaker?
In a groundbreaking development, Chinese start-up DeepSeek unveiled an AI model that rivals the performance of Silicon Valley giants - claiming it was developed at a fraction of the cost of those giants - sending shockwaves through the tech industry. The announcement caused an unprecedented plunge in NVIDIA’s market capitalisation, with nearly $600 billion wiped out in a single day, marking the largest one-day loss in Wall Street history.
The stark disparity in development and training costs between DeepSeek and its competitors has raised serious questions within technology and investment circles. Did DeepSeek bypass export restrictions and gain access to NVIDIA’s most advanced chips? Or have they truly reimagined AI, breaking the dependency on high-end hardware? Either scenario carries profound implications for AI innovation, global tech policy, and competition in the semiconductor industry. As the situation unfolds, investors and regulators remain vigilant, closely monitoring potential regulatory and market repercussions.
3. BoE cuts, but offers a dreary outlook
The Bank of England’s Monetary Policy Committee cut rates by 0.25%, bringing the current rate down to 4.5%. The rhetoric that followed however, was far from optimistic. With demand weakening and consumer confidence low, the BoE slashed its anticipated growth rate for the year in half, as well as increasing its level of anticipated unemployment to almost 5% in the next two years. Inflation is anticipated to rise to close to 4% in the Autumn due to escalating input costs and the impact of the changes to national insurance, which will come into effect in April.
Whilst the UK may avoid a technical recession, it could find itself in an era of low or zero growth. Chancellor Rachel Reeves has an almighty job on her hands to kickstart economic growth and encourage consumer confidence, and spending, to return.