Trump Steel and Aluminum Tariffs Take Effect
A new wave of US trade restrictions went into effect today when President Donald Trump imposed tariffs on steel and aluminum imports.
The 25% tariff, imposed without exceptions, marks a significant escalation in the Trump administration's aggressive trade policies, putting pressure on key trading partners such as the European Union (EU), Australia, South Korea and Japan.
The move is intended to revive the US manufacturing industry but risks increasing inflationary pressures and slowing overall economic growth.
Market Reaction: Industry Prepares for Higher Costs
Aluminum prices rose 0.3% on the London Metal Exchange, while hot-rolled steel (Coil Steel) prices rose 0.4% in Shanghai as markets assessed the impact of the new tariffs.
We at SARACEN MARKETS expect higher raw material costs to impact key sectors such as oil drilling, manufacturing, and consumer goods, potentially leading to higher prices for vehicles, electrical appliances, and packaged food products.
Meanwhile, the EU responded swiftly by announcing €26 billion (RM143.5 billion) in retaliatory tariffs on US goods.
Geopolitical Tensions Add to Market Uncertainty
Global markets remain cautious amid geopolitical shifts and trade policy uncertainty.
Just weeks after Trump criticized Ukrainian President Volodymyr Zelenskiy, Washington is now pressuring Moscow to accept a ceasefire deal negotiated in Saudi Arabia.
The 30-day ceasefire, planned by US and Ukrainian officials, is awaiting approval from Russian President Vladimir Putin. If confirmed, it could provide some relief to markets, but larger risks remain.
Inflation Continues, Obstacles to Fed Rate Cut
Investors are also paying attention to US inflation data due out tonight. SARACEN MARKETS expects the consumer price index (CPI) to rise 0.3% in February, following a stronger-than-expected 0.5% increase in January.
The persistent inflation has raised concerns about the Federal Reserve’s ability to ease monetary policy in the coming months, especially if economic growth begins to slow due to protectionist trade policies.
Commodities Remain Steady, Investors Reassess Supply and Demand Shifts
Oil prices continued to rise after the US cut its global supply forecast, signaling tighter market conditions. Gold prices remained firm, supported by safe-haven demand amid macroeconomic and geopolitical uncertainty.
Key Question: Tariffs or Fed – Which Factor Will Affect Markets More in 2025?
With the direction of the Fed’s interest rate policy still uncertain and trade tensions escalating, investors are now wondering: will tariffs have a bigger impact on US markets than monetary policy this year?
As inflation remains high and global uncertainty persists, the balance between trade protectionist policies and central bank decisions is likely to be the main driver of the market in the coming months.
Conclusion:
✅ US trade protectionist policies increase inflation risks and slow economic growth.
✅ Tariffs and trade retaliations increase global tensions, fueling market volatility.
✅ The Federal Reserve's response to inflationary pressures remains unclear, causing interest rate expectations to remain volatile.
✅ Commodity markets are moving in line with supply changes and geopolitical risks, maintaining a cautious outlook.
✅ The interplay between trade policy and monetary policy will be a determining factor in financial market movements throughout 2025.
