Economy Spotlight: The Most Important Events and What's Coming 10-16/02/2025

Introduction:

Last week, eyes were largely on what was seen as the start of a trade war due to mutual tariffs between the US on one side and Canada, Mexico and China on the other, which will be covered in the current “Economy Spotlight” report, in addition to other economic indicators and events. 

Also, we will review what the markets are waiting for this week, especially the US inflation data, which comes after the labor market data showed a noticeable difference.

Economy Spotlight. Major Economies:

First. The US Economy:

The US economy took off early last week with the US President’s announcement of 25% tariffs on Canada and Mexico and 10% on China. Although Trump suspended these tariffs on the two bordering countries in exchange for concessions on border enforcement and crime, Trump did not do so against China.

China responded to the tariffs with 15% tariffs on US coal and liquefied natural gas and 10% on crude oil, agricultural equipment and some cars. It also imposed a wide range of measures against US companies such as Google and Calvin Klein, threatening to subject these entities to a ban and trade freeze, in addition to its objection to the World Trade Organization, describing Trump’s measures as undermining sound global trade standards.

Many analysts and observers have pointed to the danger of these tariffs on the US economy, specifically in terms of raising inflation or slowing economic growth, and even raising the cost of US debt represented by raising the required yield on bonds. Trump then concluded last week with new promises to impose additional tariffs on many countries, a promise that coincided with the speech of Trump’s nominee for the position of US Trade Representative Jameson Greer, who said that countries that want to maintain access to the US market will need to reduce tariff barriers to US exports.

In terms of economic indicators, the most important of them were related to the labor market, as job opportunities decreased in December, while job growth slowed more than expected after strong gains in the previous two months, as non-farm payrolls fell from their highest levels in two years to 143,000 jobs in January, while the unemployment rate remained stable at 4%, all of which gives the possibility that the Federal Reserve will postpone cutting interest rates until at least the middle of this year.

As for other economic indicators, they were as follows:

• The manufacturing purchasing managers’ index for January rose from 49.4 to 51.2.
• The manufacturing purchasing managers’ index issued by the Institute for Supply Management (ISM) rose from 49.2 to 50.9.
• December’s job openings fell to 7.6 million from 8.156 million, down 400,000 from the expected decline.
• ADP’s nonfarm private sector payrolls (January) rose against expectations to 183,000 from 176,000.
• Services PMI (January) fell to 52.9 from 56.8.
• US crude oil inventories rose significantly by 3.463 million barrels to 8.664 million barrels.

Second. European Economy:

Eyes are turning to the European continent and studying the possibility of Trump implementing his promises to impose customs tariffs on European imports, in a move that some see as exposing the economy to more difficulties, especially since Europe has been moving over the course of three years from exposure to Russian energy to increasing its imports from America..

The European bloc has been affected by rising energy costs, as the inflation rate in the Eurozone rose to 2.5% in January on an annual basis, which is higher than the expected 2.4%.

Energy costs rose sharply, rising by 1.8% compared to the increase of 0.1% in December of last year.

Some analysts have indicated that these rates may not deter the European Central Bank from reducing interest rates, which they see as necessary to stimulate the economy, specifically the major economies in it, without hiding their fears of American customs duties that will be reflected in one way or another in raising inflation levels in the old continent.

On the upside, surveys showed that the eurozone’s struggling manufacturing sector was showing some signs of stabilization but factory activity in Asia lost momentum as weak Chinese demand and the threat of US tariffs weighed on sentiment. The Bank of England also made its decision on interest rates, cutting them for the third time to 4.5%, but halving its forecast for economic growth to 0.75% this year from its previous forecast just three months ago.

Third. Japanese Economy:

The Japanese central bank and what it could do about interest rates was one of the economic files, as the World Bank said that the Japanese central bank might raise interest rates at a good pace this year and maintain them neutrally until 2027, while some other analysts indicated that the central bank might raise interest rates above 1% to stimulate the economy well, which was reflected in the Japanese currency improving to its best levels in two months.

 Like other major economies, some Japanese officials came out to express their concerns about the US tariffs and how their economy might be affected by them in terms of rising prices, the most prominent of whom was the Japanese Finance Minister, in addition to the concerns of the Governor of the Japanese Central Bank, Kazuo Ueda, who described the Japanese economy as living in a state of inflation.

Fourth. Chinese Economy:

China's response to US tariffs was described as limited, but it was a response that was enough to raise concerns about the US and global economies, given what China represents to the world, and what China represents as an important economic partnership with the US.

As for China's economic indicators for the past week, the January manufacturing PMI remained above the benchmark between growth and contraction, recording 50.1, down from 50.5, as did the services PMI, which fell from 52.2 to 51, while China's foreign exchange reserves held steady above $3.2 trillion.

The Chinese economy ended last week with very important economic data that increased its deflationary pressures, as consumer inflation in China accelerated to its fastest pace in five months in January, while producer prices continued to shrink, reflecting mixed consumer spending and weak factory activity.

Economy Spotlight. Economic Calendar and What to Expect in the Markets Next Week:

Global markets will be awaiting the following economic data: