What Have You Got to Lose? – Currency Thoughts
What Have You Got to Lose?
April 3, 2025
As a politician, U.S. President Trump has shown an uncanny aptitude for selecting short, catchy slogans that proved to be a huge success at the ballot box. The best known of these is Make America Great Again, whose acronym MAGA took on the name of his political movement. Another best seller to his fans was the innocent-sounding refrain what have you got to lose?
Today’s immediate response from world investors to Trump’s tariff initiative was equally succinct and emphatic as the invitation to independent voters: there’s plenty to lose. In futures trading three hours prior to the opening bell on Wall Street, the Nasdaq, S&P 500, and DOW were showing overnight losses of 3.8%, 3.4% and 2.8%. Stock market losses in the Pacific Rim this Thursday had already closed down 7.2% in Vietnam, 2.8% in Japan, 2.2% in Vietnam, 1.6% in the Philippines, 1.5% in Hong Kong, 0.9% in Australia, and 0.8% in South Korea. Major European stock markets had lost 1-2.5%. For America and its friends and foes alike, the Trump team policy package is proving to be an equal-opportunity disruptor.
Ten-year sovereign debt yields today are flashing a warning of possible recession ahead. Japan’s JGB slumped 12 basis points, and the U.S. Treasury and German bund were down seven basis points each. Great Britain’s Gilt yield had sunk six basis points, and those of France, Italy and Spain were five basis points lower. Three of President Trump’s financial wishes came true, namely crypto appreciation, cheaper oil prices and a weaker dollar. Bitcoin’s price rose 1.1% overnight, while West Texas Intermediate oil’s cost plunged 5.4%. Dollar losses at 10:30 GMT had amounted to 2.2% against the Swiss franc, 2.1% versus the euro, 1.4% relative to sterling, and 1.8% vis-a-vis the Japanese yen.
The unveiled U.S. tariffs exceeded market expectations and ironically become effective next week on the 160th anniversary of the Appomattox Treaty signing that ended America’s Civil War. All countries will face a minimum 10% levy. Imports from a few notables such as Australia, Turkey, Saudi Arabia and Australia will be only that. At the other end of the spectrum will be stuff from Cambodia at 49%, Laos at 48%, Vietnam at 46%, Myanmar after its severe earthquake at 45%, Sri Lanka at 44%,Iraq at 39%, Serbia at 38%, Thailand at 37%, Bosnia and Herzegovena at 36%, China at 34%, Taiwan at 32%, Indonesia at 32%, Switzerland at 31%, and India at 26%. All imported motor vehicles and parts face a 25% tax, which will hit Canada especially hard, and the tariffs on Japan and the European Union are to rise to 24% and 20%.
Today’s data menu includes many price figures, quite a few more purchasing manager surveys and U.S. and Canadian trade numbers.
Producer price inflation in the euro area nearly doubled to a 23-month high of 3.0% in February from 1.7% in the prior month and a low of -3.5% last September.
Swiss consumer price inflation last month matched February’s 46-month low of +0.3%. Cypriot and Pakistani CPI inflation in March were also subdued at a 4-month low of 1.6% and a 678-month low of 0.7%, respectively.
Higher CPI inflation rates of 3.3% in Armenia and 5.4% in Georgia were also reported today, and then there’s the case of Turkey. Although falling a percentage point to a 39-month low, Turkish total consumer price inflation punched in at a portly 38.1%, and core inflation of 37.4% was not much lower. Turkish producer price inflation last month recorded deceleration for a tenth straight time but remained well into double digits at 23.5%.
Among composite purchasing manager surveys for which preliminary results were reported ten days ago,
- Australia‘s index was revised a bit upward to a 7-month high of 51.6. The service sector PMI also exceeded 50 and was at a 7-month high.
- Japan‘s composite index got revised up as well but, at 48.9, was in contractionary territory for the second straight month and its worst reading in 28 months. Services stagnated with a reading of 50 in March.
- The British composite PMI of 51.5 was a half point below the earlier estimate but at a 5-month high.
- Euroland‘s final composite index score of 50.9 was a half-point above the flash indication and at a 7-month high, but service sector orders and order backlogs weakened, and the U.S. tariffs will be delivering a fresh drag. If inflation picks up notably as a result in coming months, the ECB will have a hard time making a credible case for lowering the interest rate as much as officials might like.
- Composite PMIs among individual members of the joint currency area of Europe were all above the 50.0 level that separates positive growth from contraction, and they ranged from Ireland’s 4-month high of 54.6 down to France’s 2-month low of 50.5.
Hong Kong‘s private sector purchasing managers index scored below 50 for a second straight time in March with a 9-month low of 48.3. China‘s composite and service-sector PMI readings rose slightly to 4- and 3-month highs of 51.8 and 51.9.
The war with Ukraine is exerting a mounting toll on Russia’s economy. Its service sector PMI slid another 0.4 points to a 9-month low of 50.1 in March, while the composite Russian PMI printed at a 27-month low of 49.1.
Manufacturing purchasing manager indices in Lebanon and Sinagpore dropped to 5- and 10-month lows last month of 47.6 and 50.6.
Sweden‘s composite and service sector PMI indices of 50.6 and 49.4 were each their lowest readings in a half year.
Egypt’s non-oil purchasing managers index returned to sub-50 territory for the first time since December, printing at 49.2.
As if served up to order to justify the tariff gambit, the United States goods and services release today revealed a combined $253.3 billion deficit in January-February, 86% wider than in the first two months of 2024. Among trade goods, the deficit averaged over $150 billion, a record pace, in January and February that compares with a monthly average of $108.7 billion in the final quarter of the Biden presidency.
Pressure on the Federal Reserve from the White House to loosen monetary policy as a counter-weight to the “short-term” pain from the higher tariffs will only be met if forthcoming hard data reflect a discernible blow to U.S. economic growth and especially the labor market and do not flag any rise in expected medium- to long-term inflation. Today’s news that new jobless claims fell to a 7-week low last week provides strong reason for the FOMC not to accede to the president’s hopes.
It’s hard to make a case that Canada deserves the tariff hikes from the U.S. that were imposed even before today’s round of U.S. tariff changes. Instead of posting another monthly surplus above C$ 3.0 billion as analysts were anticipating, Canada’s trade balance swung to a C$ 1.52 billion deficit in February, with Canadian exports plunging 5.6% month-on-month. By contrast imports rose 0.8%.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland producer prices, market reaction to U.S. reciprocal tariffs, Service sector PMIs, U.S. and Canadian trade balances
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