Take Two: Markets rally on US-China tariff reductions; Eurozone GDP grows less than expected
- 19 May 2025 (3 min read)
What do you need to know?
Global stock markets rallied last week after the US and China agreed to cut tariffs on their respective imports by 115% for 90 days. This means the increase in US tariffs on Chinese imports under President Donald Trump falls from 145% to 30% and China's reciprocal tariffs on the US ease from 125% to 10%. Markets welcomed the news with the S&P 500 index up 5% while the MSCI World was 4% higher in the week to Thursday’s close, although the US dollar did not mirror this recovery.1 Meanwhile US annual inflation eased to 2.3% in April, its lowest reading since February 2021, and down from 2.4% in March, indicating the full tariff impact has yet to be felt.
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Around the world
The Eurozone economy grew by 0.3% in the first quarter (Q1), on a quarterly basis, in line with AXA IM’s preliminary estimate and revised down from an earlier estimate of 0.4% - following 0.2% expansion in the final three months of 2024. Meanwhile, UK economic growth picked up markedly in Q1, increasing 0.7% on a quarterly basis, up from Q4’s 0.1% and above market expectations of 0.6%. The growth reflected an increase in consumer spending and business investment ahead of impending tariff changes although AXA IM expects this boost to prove temporary. Elsewhere, Japan GDP contracted for the first time in a year in Q1, falling -0.2% on a quarterly basis, down from 0.6% growth in Q4.
Meanwhile, UK economic growth picked up markedly in Q1, increasing 0.7% on a quarterly basis, up from Q4’s 0.1% and above market expectations of 0.6%. The growth reflected an increase in consumer spending and business investment ahead of impending tariff changes although AXA IM expects this boost to prove temporary. Elsewhere, Japan GDP contracted for the first time in a year in Q1, falling -0.2% on a quarterly basis, down from 0.6% growth in Q4.
Figure in focus: $2.1trn
International tourism spending is forecast to reach a record $2.1trn this year, surpassing 2019’s peak of $1.9trn, with the travel and tourism sector expected to account for 10.3% of global GDP, at some $11.7trn, according to the World Travel & Tourism Council (WTTC). However, WTTC research highlighted that international visitor spending to the US is “projected to fall to just under $169bn this year, down from $181bn in 2024”, marking a 22.5% decline compared to its previous peak – and the only nation analysed which is forecast to see international visitor spending drop this year.
Words of wisdom
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What's coming up?
On Monday, the Eurozone issues its final inflation estimates for April while on Tuesday the Reserve Bank of Australia meets to decide on interest rates and Canada publishes its own inflation data. The UK follows with its latest inflation numbers on Wednesday and a spate of flash Purchasing Managers’ Indices are published on Thursday, including those covering the Eurozone, US, UK and Japan. Thursday also sees Germany's closely watched Ifo Business Climate Index published. On Friday Japan reports inflation data.
Disclaimer
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