Economists predict tough times triggered by a spike in tariffs. How will this affect the economy and how are financial institutions responding?
Protectionism as an Economic Boomerang
Donald Trump's tariff policy goes beyond rhetoric, turning fears into reality. In February 2025, the Conference Board's business index fell sharply, showing distrust among American consumers, who began to cut spending. Increased tariffs on foreign goods lead to higher prices and increased inflation.
The Federal Reserve's Dilemma
Nigel Green of deVere poses the question: reduce rates to stimulate borrowing or accept inflation. Meanwhile, the Trump administration ignores market turmoil, accepting production cuts as an inevitable evil. Experts warn: a long-term trade war could 'strangle' entire industries. Fed faces the choice between urgency and caution in announcing rates on Wednesday.
Bank of England's Actions and Economic Fallout
The Bank of England and the Fed face similar scenarios but different tools. At the end of 2024, the Bank of England expected controlled inflation and rates below 4%, but now rates are at 4.5%, surpassing the Fed by only 0.25%. This slight gap shows: both institutions suffer from weakened labor markets and need to protect their economies. On Thursday, the Bank of England will announce its decision under the watchful eyes of investors.
The Trumpcession poses a serious challenge for global financial institutions. They must balance economic stimulus with inflation control to prevent economic downturns.
