World economy set for another week of volatility on Western front

Over the weekend, Donald Trump further backed off on tariffs for China — issuing a wide exemption for smartphones and computers.

The global economy is gearing up for another turbulent week with trade and tariffs set to dominate once again as central banks meet to discuss key interest rate decisions and another corporate results season kicks off.

The market will be closely watched again, with investors hoping for some stability after trillions of dollars were wiped out last week despite US president Donald Trump eventually climbing down on his threat to raise tariffs on almost every country across the globe.

Over the weekend, he further backed off on tariffs for China — issuing a wide exemption for smartphones and computers.

The exclusions, published late Friday, narrow the scope of the levies by excluding the products from Mr Trump’s 125% China tariff and his baseline 10% global tariff on nearly all other countries.

The ongoing uncertainty over tariffs and global trade clouds the decision-making process for future growth

The first Group of Seven monetary policy decisions since Mr Trump’s trade war unleashed global market turmoil may prompt diverging responses from either side of the Atlantic.

Bank of Canada officials on Wednesday could keep borrowing costs on hold to guard against the potential inflationary impact, however, the European Central Bank (ECB) is now widely anticipated to reduce interest rates on Thursday.

Price and financial stability

European Central Bank president Christine Lagarde hinted at those risks last Friday, saying officials are monitoring the situation and have tools available, and that price stability and financial stability go hand-in-hand.

This is the second time in just over two years that she and colleagues find themselves puzzling over a rate decision in the wake of turmoil emanating from the US, but before Fed policymakers met.

After the collapse of Silicon Valley Bank-prompted market ructions in 2023, the European Central Bank opted not to blink, and delivered a promised half-point hike.

On this occasion, the European Central Bank's decision may be more straightforward

With tariffs likely to hit the economy, but the European Union holding off for now on inflationary countermeasures, officials are widely expected to cut their rate by a quarter point.

Rate decisions will also be made from South Korea to Turkey, with Chinese GDP data and inflation reports from Britain to Japan adding to the economic mix.

Lower interest rate

All these decisions come against a backdrop of rising US treasury yields, a weaker dollar, and slumping stocks. Investors will be seeking clues from US Fed policymakers on their appetite for lower interest rates.

Fed chairman Jerome Powell will offer his assessment of the economy in a speech on Wednesday.

Last Wednesday, Mr Trump’s major reversal of reciprocal tariffs proposed a 90-day pause.

However, baseline tariffs remain, making it more expensive to export to the US. Many companies continue to rush products to the US and stockpile goods in warehouses to get ahead of any potential new tariffs.

Data from the CSO, to be published on Tuesday, is expected to show another surge in exports to the US from Ireland in February, similar to the rise reported for January, which was linked to firms moving products to the US.

As investors wait to see the impact the pause will have on stock prices, a series of corporate quarter financial results are due to be reported this week with tariff impacts expected to dominate CEO conference calls with investors and the media.

Pernod Ricard, the owner of Jameson-maker Irish Distillers, will report sales data on Thursday, broken down by geographic region.

Investors will want to understand how the tariffs will impact sales of the company’s key brands, which also include Absolut Vodka and Mumm champagne.