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Financial markets

US Economy and Financial Markets Suffer from Trump Administration's Tariff Policies

Strategic Insights

— 2 min read

The Federal Reserve's decision not to lower interest rates, amidst President Trump's pressure to do so, has sent shockwaves through the US economy and financial markets. The uncertainty created by Trump's tariffs has left the central bank uncertain about its next move. Despite Trump's assertion that 80% tariffs on Chinese goods "seems right," the current levies stand at 145%. The stakes are high as a single meeting between the US and China in Geneva this weekend may not yield a comprehensive deal. Investors remain nervous, with US stocks closing flat on Friday, awaiting the outcome of the high-stakes trade negotiations.

Key Takeaways:

  • The Federal Reserve's Open Market Committee (FOMC) announced that it would not decrease its bank rate, citing uncertainty caused by President Trump's tariffs.
  • Fed Chair Jerome Powell stated that the economic fallout from Trump's tariffs meant it was "not at all clear" what the bank should do next.
  • US share markets managed to remain nervous and undecided on Friday, with the S&P 500 down marginally by 0.1%, the Dow Jones lost 119 points, while the Nasdaq 100 finished unchanged.
  • The South African All Share Index (ALSI) on the JSE closed on Friday at 91,861, only 0.5% down over the week, still 8.76% up from the beginning of the year.
  • The gold price recovered strongly last week, improving from its lowest level in three weeks to a record high of $3,431 last Tuesday, closing on Friday at $3,342.
  • The Rand/$ exchange rate also improved last week, closing at R18.20/$ on Friday against R18.56/$ a week ago.

Statistics:

  • The S&P 500 was down marginally by 0.1% on the week.
  • The Dow Jones lost 119 points on Friday.
  • The Nasdaq 100 finished unchanged on Friday.
  • The ALSI on the JSE closed on Friday at 91,861, a 0.5% decrease from the previous week.
  • The gold price improved by $1,431 between its lowest level in three weeks and a record high of $3,431 last Tuesday.
  • The Rand/$ exchange rate improved by 36 cents from R18.56/$ to R18.20/$ over the week.
  • Brent crude oil price improved by $2 per barrel to close on Friday at $63.55.
  • The price for petrol was 52 cents per litre, and the price for diesel was 88c cents per litre over-recovered for the first week of June.

Sources:

  • [Federal Reserve's Open Market Committee (FOMC) meeting on 7 May]
  • [STATSSA, South Africa's unemployment rate for Q1 2025]
  • [Chris Harmse, consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education]

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