Archive

Heavy Metal Trade War

• Volatility in US trade policy continues a cleaner tightening trend against China in the well-established tech war. Tariffs are a tool, but so are export restrictions.
• China expanded restrictions on rare earth mineral exports to license critical materials like tungsten. The West lacks friendly suppliers and struggles to develop alternatives.
• European defence investments may flounder. Japan and Korea may also suffer, so they can indirectly frustrate the US. Aggressive trade policy hits volumes as well as prices.

By Philip Rush

US Lands Some Disinflation In Feb-25

• The upwards trend in monthly US inflation of the past several months broke in February with a surprisingly steep slowing to 0.2% m-o-m, although airfares drove the downside.
• Drift in consensus expectations is not yet obviously broken, with this outcome 0.2pp above forecasts from a month ago. A rebound after Easter remains likely.
• Disinflation is unlikely to dissuade the Fed from holding rates in March. We doubt soft surveys will translate to recessionary conditions, so we still see no more Fed cuts.

By Philip Rush

Canada: 25bp Rate Cut To 2.75% (Consensus 2.75%) in Mar-25

• The Bank of Canada cut the policy rate by 25 basis points to 2.75%, in line with expectations, as heightened US trade tensions introduced downside risks to economic activity despite stronger-than-anticipated GDP growth.
• Inflation remains near the 2% target but is expected to rise to 2.5% in March due to the expiry of temporary tax measures, while concerns over tariffs have lifted short-term inflation expectations.
• The Bank will closely assess the balance between weaker demand and higher cost pressures, maintaining a data-dependent approach to future rate decisions, with inflation expectations and trade policy developments being key determinants.

Trump-ism And East Asia

• Donald Trump’s abandonment of the US-led international order and efforts to reshape global trade and finance do not bode well for East Asian economies that may find themselves forced by Washington into a Chinese sphere of influence as part of a grand bargain with Beijing.

By Alastair Newton