The United States economy is set to see some "disturbance" from tariffs, President Donald Trump says, but he touts levies as a tool that would help domestic industries boom.
Stock markets mostly rose on Wednesday on both sides of the Atlantic as investors shrugged off the latest US tariff moves to focus on cooling US inflation and a Ukraine ceasefire plan.
Global markets have endured severe swings this month as US President Donald Trump looks to ramp up pressure on global partners by imposing or threatening hefty duties on their goods, citing huge trade imbalances.
Markets have worried the tariffs could spark a surge in inflation and ruin chances that the US Federal Reserve cuts interest rates further.
But headline annual US consumer inflation slowed slightly to 2.8% in February, in the first full month of Donald Trump’s White House return.
That was slightly better than analysts were expecting.
Core inflation, which excludes volatile food and energy prices, dipped to an annual rate of 3.1% as forecast.
“The inflation data are a bright spot in the Federal Reserve’s battle against rising prices. They reinforce the expectation of three rate cuts later in 2025,” said Jochen Stanzl, chief market analyst at CMC Markets.
“Sentiment on Wall Street is so negative that these positive inflation figures could spark a broader recovery in stock prices,” he added.
Stanzl said further developments in US trade policy could shift sentiment “as many investors link tariffs with higher inflation, which could soon undo the hard-won declines achieved by the Federal Reserve”.
In the latest move, sweeping 25% levies on all US aluminium and steel imports came into effect, hitting numerous nations from Brazil to South Korea, as well as the European Union.
Trump had threatened to double those on Canada after Ontario imposed an electricity surcharge on three US states, but he called that off after the province halted the charge.
The move brought swift ripostes from Canada, which announced nearly $21 billion in additional tariffs on US goods, while the EU said it would target $28 billion in US imports.
China vowed to strike back, but Brazil, Britain and Mexico held off taking countermeasures.
The on-off nature of Trump’s trade policies has fuelled uncertainty in markets, and has sent the VIX “fear index” of volatility to its highest level since August.
“Market volatility is rising as visibility (over tariffs) becomes cloudier by the day,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Analysts said high uncertainty in US stock markets made other regions more attractive as investors seek out stability.
“Investors are increasingly looking overseas as concerns mount over US stock valuations, monetary policy, and economic uncertainty,” said Charu Chanana, chief investment strategist at Saxo.
