Closing post
Time to wrap up
Donald Trump’s decision to impose new tariffs on steel and aluminium has shaken UK industry, with trade body warning it will cause damage.
Gareth Stace, director general of trade body UK Steel, says:
“President Trump has taken a sledgehammer to free trade with huge ramifications for the steel sector in the UK and across the world.
This will not only hinder UK exports to the US, but it will also have hugely distortive effects on international trade flows, adding further import pressure to our own market.
The Community union has said Trump’s move is “a huge cause for concern”, adding:
“There is now an even greater need for comprehensive safeguards to protect our domestic steel from cheap overseas steel imports.”
Other countries have vowed to hit back. Canadian prime minister Justin Trudeau pledged that “Canadians will stand up strongly and firmly if we need to”.
The EU vowed to respond firmly, with European Commission President Ursula von der Leyen saying:
I deeply regret the US decision to impose tariffs on European steel and aluminum exports.
Tariffs are taxes - bad for business, worse for consumers.
Unjustified tariffs on the EU will not go unanswered—they will trigger firm and proportionate countermeasures.
The EU will act to safeguard its economic interests. We will protect our workers, businesses and consumers.
The Bank of England has also been making news.
Governor Andrew Bailey hit out at efforts to remove regulation, saying:
There is a reaction taking place against regulation, and the responses to the GFC [Great Financial Crisis]. We must not forget the lasting damage done by the GFC. There is no trade off between economic growth and financial stability.
And policymaker Catherine Mann warned that the UK jobs market is weakening, as she explained that her vote for a half-point cut to interest rates was meant to ‘cut through the noise’.
In Washington DC, Federal Reserve chair Jerome Powell has told senators that the US economy remains strong, and that there is no rush to cut interest rates.
Powell also conceded that it’s time to take a look at the rise of ‘debanking’ in the US….
Updated
Powell: Time to take a fresh look at debanking
Fed chair Jerome Powell then says he is “troubled” by reports of debanking across the US.
He suggests banks might be too risk-averse, perhaps due to money-laundering concerns, adding:
I think it needs a fresh look. It’s time for that, and we’re going to do it.
Jerome Powell then tries to swerve a question about whether the US economy has achieved a ‘soft landing’.
Perhaps modestly prevents him? Senator John Kennedy suggests he should take some credit!
However, Powell does agree that the US has not suffered a ‘hard landing’ (ie, crashing the economy to tame inflation), and it’s not in recession, he agrees.
Updated
This opening statement by Chairman Scott is accusing Powell of doing a poor job. This is insane. We have literally avoided a recession thus far.
— Jessica Inskip (@JessInskip_) February 11, 2025
Santander reports surge in mortgage applications
Back in the UK, Santander has reported a big jump in mortgage applications as buyers tried to avoid an increase in stamp duty this spring.
Applications for a house loan jumped by 130%, year-on-year, Santander UK reports.
They say that first-time buyers in the South East of England could save up to £4,280 in stamp duty by purchasing before 1 April. After the change, if they are buying a property over £500,000, they will be faced with the same stamp duty costs as a next-time buyer.
In London, where prices average £535,700, this would add a potential extra cost of £11,250.
Graham Sellar, head of intermediary channel – mortgages, at Santander, said:
“We all know that buying a home – whether it’s our first or our forever home – comes with significant costs. Every penny counts when considering things like legals and removals costs, so it’s great to see so many people make the most of the holiday and secure their new home ahead of 1 April.”
Senator Liz Warren then challenges Jerome Powell about Elon Musk’s attack on the US consumer protection agency, the CFPB.
Warren says there is no more “cop on the beat” protecting families from getting ripped off, or rooting out illegal conduct by big banks.
If CFPB is not there, who is administrating JP Morgan or Wells Fargo’s consumer exams to check they are sticking to the law, Warren asks.
“No other federal regulator,” Powell replies.
Jerome Powell is now being questioned about the rise of debanking – will he work with the committee to ending the practice?
The Fed chair indicates he will, and indicates that there needs to be a better focus on “bread and butter banking”.
Chair Tim Scott asks Powell to commit to end "debanking," including to "revise the Federal Reserve supervision manuals to remove reputational risk as a tool to weigh in on political topics." Powell agrees.
— Brendan Pedersen (@BrendanPedersen) February 11, 2025
Fed chair Powell says US economy is strong, no rush to cut rates
Over on Capitol Hill, US Federal Reserve chair Jerome Powell will tell senators that the US economy is strong, meaning there is no rush to cut interest rates.
Powell is to deliver his semiannual monetary policy testimony before the Senate Banking, Housing and Urban Affairs Committee this afternoon.
His prepared testimony has just been released, showing that Powell points to the US’s low unemployment rate, while inflation is still above the Fed’s 2% target.
Powell says:
“The economy is strong overall and has made significant progress toward our goals over the past two years.”
“We do not need to be in a hurry to adjust our policy stance. We know that reducing policy restraint too fast or too much could hinder progress on inflation.”
Powell also does mention the “risks and uncertainties” which the economy faces – surely a nod to the new Trump administration, as it imposes new tariffs, and pushes for lower immigration.
He adds:
“Policy is well positioned to deal with the risks and. uncertainties that we face.”
Wall Street has opened a little lower, as investors react to last night’s tariffs announcement, and await testimony from America’s top central banker.
The Dow Jones Industrial Average fell 69.0 points, or 0.16%, at the open to 44,401.38, with the S&P 500 losing 0.28% and the tech-focused Nasdaq Composite off 0.57%.
BP rebrands Gulf of Mexico as Gulf of America
BP appears to have bowed to Donald Trump’s whims and agreed to rename the Gulf of Mexico.
The oil giant’s financial results this morning repeatedly refer to the “Gulf of America”, which will please the new US president who pledged to rename the ocean basin in his inauguration speech last month.
BP’s CEO, Murray Auchincloss, argues that the name change has already taken place. Speaking after reporting a tumble in profits last year, Auchincloss said:
“The United States has changed it to the Gulf of America, and so have we, along with all the competition.”
BP has special reason to confine the Gulf of Mexico to history, having been responsible for its worst environmental disaster to date, when the Deepwater Horizon exploded, killing 10 workers.
Pret is ditching plans to double the cost of its subscription service to £10 in March amid tough conditions on the high street.
The company began offering subscribers five half-price coffees a day for a £5 a month fee last summer, saying it would increase in price next month. The current system replaced a £30 a month deal which offered five free hot or iced barista-made drinks and a 20% discount on food.
Sky News: Octopus Energy wades into battle for Thames Water's future
The future of Thames Water has taken another twist, after energy supplier Octopus struck a deal to provide technology to a consortium planning a takeover of the troubled water utility.
Sky News are reporting that Octopus’s technology arm, Kraken, has struck a deal to partner with Covalis Capital and Suez in a consortium that would inject about £1bn of equity into the debt-laden water company.
Back in December, Thames received a bid from Covalis Capital that would result in France’s Suez Group being brought in to manage a restructure of the UK’s largest water company.
Today, Sky says:
The deal with Kraken would provide Covalis Capital, the infrastructure investor spearheading the consortium, with critical technology expertise as it seeks to manage one of the UK’s most complex utilities - and one with a long-standing reputation for poor customer service.
Earlier reports said that Covalis would inject about £1bn into Thames Water, with £4bn more raised from asset sales, refinancing and a stock market listing.
More here:
Exclusive: Octopus Energy Group is wading into the fight for future control of Thames Water after agreeing a deal with a Covalis Capital-led consortium that would see its technology arm, Kraken, managing the 16m customers of the UK’s biggest water utility. https://t.co/n0nNmrYwe3
— Mark Kleinman (@MarkKleinmanSky) February 11, 2025
Last week, London’s high court heard that Thames Water may need as much as £10bn in debt and equity investment to repair its finances, according to a representative of creditors hoping to lend the struggling utility another £3bn.
And while Kraken’s tech might improve the service for Thames customers, it wouldn’t be able to fix the poor state of its infrastructure.
Andrew Bailey also suggests that the speed of change in financial markets is being underestimated.
Citing the rise of the non-banking sector, Bailey says this pace of change shows no signs of dropping off.
He explains:
As authorities responsible for ensuring financial stability, both domestically and globally, we have to keep our assessment and understanding up to speed.
And he cites two major changes made by the Bank:
The first is to introduce more dynamic – flow-style – market stress exercises alongside the more established and more static institutional stress tests. This allows us to stress test markets more efficiently, and, critically, as part of that test the assumptions that market participants make about the reactions and behaviour of each other, and thus of markets as a whole. This process of holding a mirror up is crucial.
The second change is the introduction of a contingent liquidity facility for certain non-banks, designed to act as protection against stress in core markets.
Updated
Bank of England governor warns against ripping out regulations
Newsflash: The governor of the Bank of England has warned against ripping out regulations introduced after the great financial crisis (GFC) almost two decades ago.
In a speech to the University of Chicago Booth School of Business in London, Andrew Bailey has insisted that financial stability and economic growth go hand-in-hand, rather than acting as opposing forces.
Bailey says:
There is a reaction taking place against regulation, and the responses to the GFC. We must not forget the lasting damage done by the GFC. There is no trade off between economic growth and financial stability.
Bailey concedes, though, that there are usually choices about how policymakers deal with evidence of vulnerabilities, saying:
It is critical that we have and develop tools of assessment and intervention. But these interventions may not always need to be more regulation.
They can be liquidity facilities, and they can be to improve areas of the financial infrastructure…
Bailey’s comments come as UK chancellor Rachel Reeves pushes UK regulators to ‘tearr down’ barriers holding back economic growth.
In the US, Elon Musk is pushing for a “wholesale removal of regulations”, sparking warnings that the Tesla boss was desecrating the US constitution.
TUI shares fall after booking growth slows
Shares in Europe’s biggest travel company Tui fell by nearly 10% today after it said bookings growth had slowed.
The company reported a jump in underlying profits to €51m between October and December, from €6m a year earlier. Revenues rose by 13% to €4.9bn, as 3.7 million people travelled with Tui. Dynamically packaged holidays grew by 18% to £700,000 – those customised travel packages that allow travellers to choose their flights, accommodation, and other travel components, have become more popular.
But high spending, on marketing and IT, and more interest in dynamic packages and flexible pricing, have clouded the outlook, and Tui is forecasting that profit growth will ease to between 7% and 10% this year, mainly due to one-off costs.
Tui chief executive Sebastian Ebel said bookings growth has slowed to 2% because the company has been less aggressive in adding holidays and keeping prices low. Demand is also shifting to new destinations and away from previous strong markets, like Turkey.
Average prices for winter breaks are 4% above last year’s levels, with the Canary Islands, Egypt and the Cape Verde Islands in demand. For summer deals, prices are also 4% higher than last year, with many people booking trips to Spain, Greece and Turkey.
Ebel said there was a slight dip in bookings after Christmas, amid poor weather in Britain and less consumer spending power after the holidays.
Overall, demand remained robust though, he insisted, adding:
“People prioritise their holidays even in times of change, and even in a challenging economic environment in Europe for almost all sectors.”
Like other European airline businesses, Tui has been affected by Boeing delivery delays and high costs. Ebel said he hopes the Boeing 737 MAX delivery delays will be resolved by 2027.
BBC: UK will not immediately respond to US metal tariffs
The BBC are reporting that the UK will not retaliate immediately to the renewal of steel and aluminium tariffs by the US.
“Cool heads” were necessary to avoid escalating trade tensions with the Trump administration, UK government sources have said, adding that retaliatory tariffs may not be in the best interest of the industry.
UK ministers will meet the steel industry and unions later on Tuesday and visit key steel companies later this week, the Beeb’s Faisal Islam adds.
Developing story on UK not retaliating against Trump’s tariffs on steel and aluminium here: https://t.co/VejRJdgTiN
— Faisal Islam (@faisalislam) February 11, 2025
South Korea's top think tank lowers economic growth projection, citing Trump's tariffs
South Korea’s top economic think tank has slashed its growth forecast for the country’s economy for the second time in four months, Associated Press reports, expressing concern about the impact of U.S. President Donald Trump’s expanding tariffs.
The state-run Korea Development Institute now projects South Korea’s economy to grow by 1.6% in 2025, which is 0.4 percentage points lower than its previous estimate announced in November.
Kim Jiyeon, a KDI economist, said the “deterioration of the trade environment” following Trump’s inauguration was a major factor. South Korea is also grappling with political instability caused by the impeachment and criminal indictment of President Yoon Suk Yeol after he briefly imposed martial law in December.
Domestic demand remains weak due to slowing consumer spending and a declining job market, and the pace of exports is slowing with most key industries aside from semiconductors struggling to find momentum, said Jung Kyuchul, who heads KDI’s macroeconomic analysis department.
KDI could further lower its growth projections if Trump’s trade actions intensify or South Korea’s political turmoil drags on, Jung said.
Jung told a briefing:
“In November, we assumed that Trump’s steps to increase tariffs would proceed gradually over time and wouldn’t be carried out so quickly this year, but there have already been tariff increases targeting countries like China.”
“We expected that uncertainties would be gradually resolved after the Trump administration took office, but we are now in a situation where uncertainties have actually grown.”
Updated
Economics professor Justin Wolfers shows that the last time Donald Trump imposed tariffs on steel, it led to a small increase in jobs in steel making, but a larger fall in headcount among steel users:
The 2018 steel tariffs just called to remind you that steel is produced by a tiny sliver of the economy, but used as an input by a much broader swathe of manufacturers.
— Justin Wolfers (@JustinWolfers) February 10, 2025
https://t.co/er2xsVgxEB pic.twitter.com/lDT6aREXlY
Economists at Deutsche Bank have calculated that Donald Trump’s new metal tariffs will be inflationary.
If sustained, steel and aluminium tariffs combined with reciprocal tariffs could increase core PCE [an inflation measure] in 2025 by an additional 30-40bps (0.3 to 0.4 percentage points).
Deutsche’s Jim Reid says:
If the delayed Canada and Mexico tariffs were to ultimately go into effect as well, inflation in 2025 could be above 3.5%, though the assumption is that tariffs would have limited impact beyond this year.
While our economists’ baseline is that the Fed would prefer to “look through” the price level impact by keeping rates steady, their ability to do so could be constrained if inflation expectations begin to rise and / or the labour market reemerges as an additional source of inflationary pressure.
Recent data suggest both these outcomes cannot be fully discounted.
Any fears that the UK could suffer a ‘buyers strike’ on its debt should be eased by news of record demand at a bond sale this morning.
Investors placed record orders worth more than £140bn at the sale of a new 4.5% 2035 British government bond, Reuters reports.
£13bn of debt was available, with buyers attracted by the relatively high yields available on British bonds.
The timing, breadth and scope of US tariffs will fuel uncertainty, and act as a brake to economic growth, warns Karsten Junius, chief economist at J. Safra Sarasin Sustainable Asset Management:
The US economy started the year with strong momentum, and fundamentals remain solid. Under normal circumstances, these factors would justify an upward revision to our growth forecast. Yet President Trump’s decision to launch a global trade war – imposing steep tariffs on all imports from Mexico, Canada, and China – have led us to reconsider the growth revision.
Tariffs were not unexpected; Trump campaigned on protectionism. What was striking was the timing, scale, and scope of these measures. Shortly after taking office, he instructed federal agencies to review trade policy, suggesting a more methodical approach. But his latest move – slapping 25% tariffs on almost all imports from Mexico and Canada, effectively breaking apart USMCA, his own trade deal central to American manufacturing – was anything but methodical. The 10ppt tariff increase on Chinese imports, along with potential retaliatory measures, initially escaped much attention. But they are much more consequential for the US economy compared to what he did in his first term.
Although Trump later backtracked, offering a one-month reprieve to Mexico and Canada but kept tariffs on China, the real issue for businesses and investors is the lack of clarity about his ultimate aim. Even if the final tariff increases are relatively modest, heightened policy uncertainty will weigh on growth and fuel financial market volatility. As a result, our 2025 US GDP growth forecast remains unchanged at 2.2%.
Former US Treasury Secretary Larry Summers has warned that the US economy will suffer from Donald Trump’s new tariffs on steel and aluminium.
Posting on X, he says:
This will mean fewer American jobs, more American inflation and because of damage to us exports probably a bigger trade deficit. I do not see any national security gain from tariffing Canada.
I'm sorry that Trump's threatened steel and aluminum tariffs have now been implemented.
— Lawrence H. Summers (@LHSummers) February 11, 2025
This will mean fewer American jobs, more American inflation and because of damage to us exports probably a bigger trade deficit. I do not see any national security gain from tariffing Canada.
Shares in European steelmakers have fallen this morning.
ArcelorMittal are down 1.3%, Voestalpine has dropped 1% each, while Thyssenkrupp has lost 2.7%.
Community calls for comprehensive safeguards to protect UK domestic steel
Community, the union for the steel industry, is urging the government to bring in new safeguards to prevent dumping of cheap foreign steel.
Alasdair McDiarmid, Community’s assistant general secretary, says:
“The new tariff confirmed by Donald Trump is a huge cause for concern, and represents a retrograde step for the steel industry and economies on both sides of the Atlantic.
“There is now an even greater need for comprehensive safeguards to protect our domestic steel from cheap overseas steel imports.”
UK Steel: Trump has taken a sledgehammer to free trade
The UK steel sector fears that Donald Trump’s new tariffs on steel will disrupt global trade, and lead to a surge of foreign steel into Britain – potentially hurting the domestic industry.
Gareth Stace, director general of trade body UK Steel, says:
“President Trump has taken a sledgehammer to free trade with huge ramifications for the steel sector in the UK and across the world.
This will not only hinder UK exports to the US, but it will also have hugely distortive effects on international trade flows, adding further import pressure to our own market.
Stace insists that UK steel isn’t a threat to US national security, and indeed is vital to American industry:
Our high-quality products serve key US industries, many of which cannot source these domestically. This is a moment where our countries should work together to tackle global steel overproduction, not to be at loggerheads. The UK stands with the US on tackling global excess steel capacity and unfair trade, and our industry urges the UK Government to take stronger action on these issues.
“This is clearly a new era for global trade. We are confident the UK Government recognises the impact on our industry and will explore all available options. Both immediate responses, such as negotiating a solution and long-term measures to prevent harmful trade diversion into the UK market, are options.”
Sky News’s Ed Conway has spotted that Ukraine will now face steel tariffs:
👀
— Ed Conway (@EdConwaySky) February 11, 2025
Donald Trump has explicitly added Ukraine to the list of countries facing steel tariffs. Joe Biden had excluded it from tariffs because of the war. pic.twitter.com/B65f7w3qeR
Trudeau: Canada will stand up firmly to US tariffs
Canadian prime minister Justin Trudeau has said today that Canada would seek to highlight the negative impact of the United States’ steel and aluminium tariffs and that - if needed - the response from Canada would be firm and clear, Reuters reports.
Speaking on the sidelines of a major artificial intelligence summit in Paris today, Trudeau says:
“Canadians will stand up strongly and firmly if we need to,”
Trudeau also described the new tariffs as “unacceptable.”
Updated
Catherine Mann has also warned that the UK jobs market is weakening.
She tells her audience in Leeds:
I judge that the current and likely continued weak demand conditions will lead to a further loosening of the labor market which tend to follow non-linear dynamics.
Thus, even if near-term inflation expectations firm on the back of the inflation hump, these factors likely will restrain pass-through to wages and prevent second-round effects from setting in.
In layman’s terms, Mann appears to be warning that job creation will slow, and layoffs will increase, and that workers can forget about bumper pay increases even if inflation picks up.
She explains:
Already, the labour market has all but stopped adding jobs with employment nearly flat.
Vacancies are now below their pre-Covid level and the vacancies-to-unemployment ratio which we have often used to proxy for ‘tightness’ is now below the level that Bank researchers consider to be consistent with a balanced labour market.
Updated
Mann: Vote for big rate reduction 'cut through the noise'
Bank of England policymaker Catherine Mann is now explaining why she voted for a half-point cut in interest rates last week, in a speech in Leeds.
Mann is telling Leeds Beckett University that her “activist” strategy demanded a call for a large reduction to borrowing costs, to cut through the noise.
[reminder: Mann and fellow policymaker Swati Dhingra were outvoted 7-2, with the majority at the Bank choosing a smaller rate cut]
Echoing the point she makes in her FT interview today, Mann says:
To conclude, as an activist policy maker, I chose 50 basis points now, along with continued restrictiveness in the future, and a higher long-term Bank Rate to
1) ‘cut through the noise’,
2) anchor expectations through the inflation hump, and
3) acknowledge structural impediments and macroeconomic volatility in longer term.
Updated
EU vows to respond firmly to 'unjustified' tariffs
The European Union has vowed to respond firmly to ‘unjustified’ tariffs imposed by the US, a move that threatens to spark a transatlantic trade war.
In a statement released after Donald Trump signed off 25% tariffs on steel and aluminium tariffs, European Commission President Ursula von der Leyen says:
I deeply regret the US decision to impose tariffs on European steel and aluminum exports.
Tariffs are taxes - bad for business, worse for consumers.
Unjustified tariffs on the EU will not go unanswered—they will trigger firm and proportionate countermeasures.
The EU will act to safeguard its economic interests. We will protect our workers, businesses and consumers.
Separately, European Union trade commissioner Maros Sefcovic has told the European Parliament this morning that tariffs are a lose-lose scenario.
Sefcovic also argued that the new levies on aluminium and steel imports are bad for businesses and worse for consumers, Reuters reports, and will raise costs and fuel US inflation.
EU TRADE COMMISSIONER SEFCOVIC SAYS TRADE, LIKE ANY BASIS, THRIVES ON PREDICTABILITY AND FAIR RULES
— PiQ (@PiQSuite) February 11, 2025
EU TRADE COMMISSIONER SEFCOVIC SAYS EU PREPARED TO FACE UP TO ANY CHALLENGES IN THIS NEW ERA
EU TRADE COMMISSIONER SAYS WE ARE LOOKING INTO POSSIBILITY OF STRONGER TRADE TIES…
EU TRADE COMMISSIONER: TARIFFS ARE TAXES, THEY ARE BAD FOR BUSINESSES AND WORSE FOR CONSUMERS
— PiQ (@PiQSuite) February 11, 2025
EU TRADE CHIEF: BY IMPOSING TARIFFS, THE UNITED STATES WILL BE TAXING ITS OWN CITIZENS, RAISING COSTS FOR ITS OWN BUSINESSES AND WILL FUEL INFLATION
UK union Unite is urging the government to treat Britain’s steel industry as “critical national infrastructure”.
Unite general secretary Sharon Graham says Donald Trump’s steel tariffs should be “a wake-up call”, adding::
I have long been calling for the steel industry to be classified as critical national infrastructure – just as it is in the US.
UK steel production is a matter of national security. We now need to change the rules to ensure that the public sector buys UK produced steel, wherever it is available. This will create jobs and drive growth.
“Instead of leaving our security and our steel workers open to the whims of other countries, we should be protecting our domestic steel industry from unfair competition and ensuring that we can transition into a leading producer of green steel.”
FTSE 100 hits fresh record high as markets digest tariffs
European stock markets have made a muted start to trading, but that hasn’t stopped the UK’s blue-chip share index hitting another record.
In London, the FTSE 100 share index has gained 0.25% or 22 points to 8,789 points, overtaking yesterday’s record, with weapons producer BAE Systems (+1.1%) among the top risers.
France’s CAC 40 is up 0.17% while Germany’s DAX is flat.
Unlike last week’s whipsaw experience on tariffs, where risk assets sold off and then recovered, the market reaction thus far has been fairly muted, says Mark Haefele, chief investment officer at UBS Global Wealth Management.
UBS points out:
The CBOE VIX Index of implied US equity volatility remains subdued at 15.8 points, within range of its 2025 lows. Gold has drawn more bids, rallying 2.6% over the past two sessions to a record high of $2,942/oz.
With investors taking more of a tempered approach, Haefele makes several observations:
Trade imbalances cannot easily be negotiated.
It’s also important to distinguish between the different tariff categories under consideration.
The metal tariffs may serve as negotiating leverage.
Other partners with higher barriers to US goods are on notice.
He adds:
“Despite rising tariff risks, we still expect that a solid US economy, AI tailwinds, and gradual Fed rate cuts will offer a favorable backdrop for equities. We continue to expect the S&P 500 to end the year higher.”
UK inflation less of a threat as corporate pricing power weakens, BoE's Mann says
It’s always worth noting when a bird changes its plumage. Shedding one coat for another can be both attractive and informative – alerting us to a change in conditions (that’s enough Spring Watch, Ed).
And as in ornithology, also in monetary policy. Last week, Catherine Mann – previously a hawkish Bank of England policymaker opposed to large interest rate cuts, emerged as a dove!
City economists were surprised that Mann had joined the reliably dovish Swati Dhingra in voting for a large half-point cut to UK interest rates, when their seven colleagues only wanted a standard quarter-point reduction.
Mann is expected to outline her thinking in a speech this morning.
But in an interview with the Financial Times, just published, Mann says she voted for a half-point cut last week because of a weakening jobs market and slowing consumer demand, which will make it harder for businesses to hike prices and fuel inflation.
Mann now believes that a weakening UK consumer will lead to “a lack of pricing power” for businesses.
Channelling JM Keynes’s famous ‘when the facts change….’ quote, Mann says:
“Demand conditions are quite a bit weaker than has been the case — and I have changed my mind on that,
Mann also warns that the data is pointing to a “non-linear” fall in employment, as firms hit by a rise in the minimum wage and employer national insurance contributions rethink their headcount plans.
Last week the Bank said it would take a ‘gradual and careful’ approach to easing monetary policy.
Their new dove is not cautious, though! As Mann tells the FT:
“To the extent that we can communicate what we think are the appropriate financial conditions for the UK economy, a larger move is a superior communication device, in my view.”
EU trade ministers to discuss Trump tariffs tomorrow
EU trade ministers are set to hold a video conference on Wednesday, following last night’s announcement that the US will impose 25% tariffs on steel and aluminium tariffs, Reuters reports, citing EU diplomats.
The European Commission, which oversees trade policy for the European Union, will seek to gauge views of the 27 EU members at the video conference due to take place at 3pm GMT.
EU TRADE MINISTERS SET TO HOLD VIDEO CONFERENCE ON WEDNESDAY AFTER TRUMP CONFIRMS STEEL AND ALUMINIUM TARIFFS - EU DIPLOMATS
— PiQ (@PiQSuite) February 11, 2025
South Korea’s trade minister Cheong In-kyo has predicted that Donald Trump’s 25% tariffs on steel and aluminium imports will reduce U.S. steel demand and erode steel exporters’ profitability.
Speaking at a meeting with steel companies today, Cheong said South Korea will “actively consider” whether there is room for negotiation on the tariffs – despite Trump having said the new levies will come “without exceptions or exemptions”.
Cheong also indicated that the tariffs may offer opportunities for Korean companies to find new export markets [British steelmakers fear that UK market could be hit by a wave of cheap metal once US tariffs come in].
Shares in South Korean steelmakers extended losses on Tuesday, with POSCO Holdings down 0.8% and Dongkuk Steel Mill losing 0.9%
BP profits drop
In the City, quarterly profits at BP have fallen to a four-year low, as declining profit margins eat into earnings at its refinery operations.
BP’s underlying replacement cost profit, its definition of net income, dropped to $1.17bn in the fourth quarter of 2024, down from $2.99bn last year.
BP says:
Compared with the third quarter 2024, the underlying result reflects weaker realized refining margins, higher impact from turnaround activity, seasonally lower customer volumes and fuels margins and higher other businesses & corporate underlying charge.
On an annual basis, profits declined to $8.9bn (£7.9bn) last year from almost $14bn in 2023.
CEO Murray Auchincloss has defended the drop in profits, arguing that BP has “laid the foundations for growth” by “reshaping” its energy portfolio in 2024, and would now “fundamentally reset our strategy and drive further improvements in performance”.
Auchincloss is under pressure after activist investor Elliott took a stake in BP.
Mexico's richest man says tariffs don't work
Carlos Slim, Mexico’s richest man, has warned that tariffs simply don’t work.
Speaking at his annual conference on Monday, Slim warned:
“They increase inflation … the interest rate doesn’t go down … tariffs don’t solve problems.”
Trump’s tariff threats are simply a negotiating tool, Slim argued.
Slim, who is worth $81.5bn according to Bloomberg, controls the largest mobile-phone operator in Latin America, and also has stakes in commercial banks, energy companies, and Mexico’s construction industry.
He also argued that Trump has a lot to do in the next four years, adding:
“What the U.S. has to do is regain global leadership,” he said.
“It would be interesting if he did a sort of double play, let’s say on one side reduce the costs of certain things and on the other channel it toward investment.”
Key event
Asia-Pacific stock markets are mixed as traders digest Trump’s tariffs announcement.
China’s CSI 300 index has dipped by 0.5%, while South Korea’s KOSPI is up 0.6%.
Kathleen Brooks, research director at XTB says President Trump’s tariff policy “remains unclear”, and is thus difficult to price in by financial markets.
She writes:
Trump said on Monday that tariffs on metals could go higher, and other tariffs could be announced later this week. At this stage, traders have little clarity about how far Trump’s tariff policies will go, whether they are mostly a negotiating tactic or if they will have a more long-lasting economic impact. It is also unclear if it will spark a wave of protectionism.
Are markets being too complacent, though?
Brooks says:
The Vix volatility index fell to 15.81 on Monday, which is below the 12-month average of 15.92. This is a clear sign that investors have some ‘tariff fatigue’ and it may take another driver, such as inflation concerns, to move the dial for equity markets. While volatility remains low, this could help stocks to grind higher.
Gold at new record high after Trump tariffs
The gold price has hit a new record high as demand for safe-haven assets continues to push up bullion.
The spot gold price traded as high as $2,942.70 per ounce after Donald Trump announced the new steel and aluminium tariffs. That means its gained over 11% so far this year.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
The US dollar extended gains and gold hit a fresh ATH fuelled by fresh tariff threats from Donald Trump. In addition, China now allows insurers to buy gold and hold 1% of their holdings in the precious metal as other investment options are not ideal at the moment.
French Industry Minister responds to Trump tariffs calling for united Europe response
France’s Minister for Industry and Energy, Marc Ferracci, has responded to Trump’s tariffs, saying that Europe should respond in a united and firm manner, Reuters reports.
Donald Trump announced 25% tariffs on foreign steel and aluminum on Monday, ramping up his controversial bid to boost the US economy by hiking taxes on imports from overseas.
The modified US duties will be enforced “without exceptions or exemptions”, the president declared, dashing the hopes of countries that hoped to avoid them.
Trump first imposed steep tariffs on foreign steel and aluminum during his first presidency. The action announced on Monday night ends exemptions granted to certain countries, and increases the duty rate on aluminum.
The changes are not due to come into effect until 4 March, however, according to a White House official – raising the prospect of the Trump administration brokering deals with governments seeking reprieve.
Countries including Australia have already been making their case and Trump later said he would give “great consideration” to Australia’s request for an exemption to the steel tariffs due to that country’s trade deficit with the US.
Opening summary
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy, as reaction to the latest US tariffs comes in.
Donald Trump announced 25% tariffs on foreign steel and aluminum on Monday, ramping up his controversial bid to boost the US economy by hiking taxes on imports from overseas.
The modified US duties will be enforced “without exceptions or exemptions”, the president declared, dashing the hopes of countries that hoped to avoid them.
Asked about the possibility of other countries retaliating against US tariffs, Trump said: “I don’t mind.”
Canada’s industry minister said the US tariffs were “totally unjustified”, with Canadian steel and aluminum supporting key US industries including defense, shipbuilding, energy and autos.
Meanwhile Hong Kong will file a complaint on recent US tariffs imposed on the city to the World Trade Organization, claiming the US has completely ignored the city’s status as a separate customs territory, chief secretary Eric Chan said on Tuesday.
“This is absolutely inconsistent with the WTO rules. Of course, they have totally disregarded Hong Kong is a separate customs territory,” Chan, the China-ruled city’s number two official, told reporters.
“We will file a complaint to the WTO regarding this unreasonable arrangement,” he said without giving specifics.
Updated
