Global markets brace for tariffs and shifting central bank policy

Markets worldwide are on edge as investors weigh new tariff measures, a possible shift in European monetary policy, and signs of softening US manufacturing. Uncertainty over both trade and economic growth is keeping sentiment cautious and fueling a renewed focus on defensive strategies.

Eurozone inflation decelerates

Recent data indicate that inflation in the euro area slowed slightly, inching closer to the European Central Bank’s (ECB) stated goal of around 2%. Core measures also cooled, with services price growth easing. While the labor market remains tight, the reduced inflation pace may shape policymakers’ forthcoming decisions on interest rates. Observers are assessing whether the ECB will continue lowering borrowing costs at its upcoming meeting, amid questions over how tariffs proposed by the United States could influence both prices and economic growth in the region.

US manufacturing contracts for the first time this year

In the United States, manufacturing activity dipped below the threshold that separates growth from contraction. Surveyed businesses have reported softening demand, a continued pullback in orders, and uncertainty related to shifting trade policies. Rising costs for materials—possibly linked to companies racing to stock up before potential tariff hikes—appear to be squeezing margins, while cautious hiring trends reflect concerns about near-term economic momentum.

Stocks slide as tariff announcement nears

Equities resumed a downward path as traders positioned themselves ahead of imminent US tariff measures. Concerns center on how extensive and complex the new levies will be, as well as how quickly they may come into force. Many sectors exposed to global supply chains, including manufacturing and automotive, saw renewed selling pressure. Meanwhile, safe-haven assets such as gold attracted inflows, with precious metals prices hovering near recent record highs.

Tariff plans remain in flux

Despite the promise of a major announcement soon, the final structure and scope of the US administration’s trade tariffs remain unclear. Multiple pathways reportedly exist—from a tiered system based on the level of foreign barriers, to a flat global tariff, to a more tailored approach for each country. The potential for last-minute changes has led to significant speculation among businesses, policymakers, and investors. Many are bracing for immediate implementation, while hoping that avenues remain open for negotiation to mitigate some of the impact.

Looking ahead

Monetary policy: Market participants are watching closely for signals from the ECB on whether it will pause further easing in April, especially with the outlook clouded by shifting trade conditions and fresh inflation data.

Trade developments: With the White House expected to finalize a broad range of tariffs, businesses and investors are anxious for clarity on rate levels, scope, and the likelihood of exemptions or subsequent revisions.

Economic data: In the US, factories face higher costs and softer demand, making upcoming indicators on consumer sentiment and industrial production critical to gauging whether the manufacturing slowdown is temporary or a sign of broader weakness.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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