Markets are taking a collective deep breath after US President Donald Trump's weekend threat to impose tariffs on European countries, including the UK. The FTSE 100 index closed at 0.4% down, a relatively tame response considering the initial shock.
However, investors have grown accustomed to Trump's bombastic rhetoric, and market participants are now skeptical that it will translate into concrete action. "More than a year into Trump's second term, market participants have become increasingly desensitised to his rhetoric," notes Jonas Goltermann, deputy chief markets economist at Capital Economics.
The threat of tariffs does pose long-term risks, particularly if they were to be implemented for an extended period. Economists warn that this could lead to a UK or eurozone recession. Furthermore, the potential breakup of NATO is another geopolitical shift that markets struggle to price in due to its complexity and uncertainty.
Moreover, some analysts are sounding the alarm on tit-for-tat measures extending beyond tariffs into capital markets. George Saravelos, Deutsche Bank's currency strategist, suggests that European countries may be less willing to own US assets if the stability of the Western alliance is under threat. The US owes a significant amount to Europe in terms of debt and equities, with European countries holding $8 trillion worth.
While this idea is still speculative, it highlights the potential for market disruptions if tensions escalate further. As one observer notes, "it's a weaponisation of capital rather than trade flows that would be far more disruptive to markets."
Despite these concerns, investors remain cautiously optimistic about the future. Trump's initial threats often create buying opportunities in the long term, and 2025 was already shaping up as a strong year for stock markets globally.
For now, markets are choosing to focus on fundamentals rather than Trump's bluster. However, this complacency may not last if investors misjudge the severity of the situation. The stakes are high, and the potential consequences of further escalation are too great to be ignored.
However, investors have grown accustomed to Trump's bombastic rhetoric, and market participants are now skeptical that it will translate into concrete action. "More than a year into Trump's second term, market participants have become increasingly desensitised to his rhetoric," notes Jonas Goltermann, deputy chief markets economist at Capital Economics.
The threat of tariffs does pose long-term risks, particularly if they were to be implemented for an extended period. Economists warn that this could lead to a UK or eurozone recession. Furthermore, the potential breakup of NATO is another geopolitical shift that markets struggle to price in due to its complexity and uncertainty.
Moreover, some analysts are sounding the alarm on tit-for-tat measures extending beyond tariffs into capital markets. George Saravelos, Deutsche Bank's currency strategist, suggests that European countries may be less willing to own US assets if the stability of the Western alliance is under threat. The US owes a significant amount to Europe in terms of debt and equities, with European countries holding $8 trillion worth.
While this idea is still speculative, it highlights the potential for market disruptions if tensions escalate further. As one observer notes, "it's a weaponisation of capital rather than trade flows that would be far more disruptive to markets."
Despite these concerns, investors remain cautiously optimistic about the future. Trump's initial threats often create buying opportunities in the long term, and 2025 was already shaping up as a strong year for stock markets globally.
For now, markets are choosing to focus on fundamentals rather than Trump's bluster. However, this complacency may not last if investors misjudge the severity of the situation. The stakes are high, and the potential consequences of further escalation are too great to be ignored.
omg i think trump is just trying to get a rise out of ppl again lol markets r like super used to his drama rn but u never know wot he's gonna say next 
tbh the idea of europe taking back their $8 trillion in assets from us sounds kinda scary tho 
and if nato breaks up, that's gonna be a WHOLE other level of market chaos 
still, markets r trying to stay chill rn and focus on fundamentals lol but i dont think thats gonna last forever 
. It's like investors are waiting for the other shoe to drop, but in the meantime, they're going with the flow 
. But, I do think this could be a ticking time bomb - if these tensions escalate, watch out for some serious market volatility 
!
. Like, more than a year into his second term and they're still not rattled? That's some serious skepticism, fam! 
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. Like, Trump's been saying this stuff for ages now and the markets haven't really reacted...until now? 
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Still a possibility of long-term risks tho... might wanna keep an eye on NATO 
. But honestly, who really knows what he'll do? It's all just a game of chess with global markets as the board 
. The thing is, European countries are kinda holding onto their US debt like a security blanket 
Trump's threats are just noise, you know? Like, how many times is he going to promise to do something crazy before actually following through?! 
We're talking about some major economic implications here. If it comes to pass, I don't want to be on either side of that. The US debt to Europe is already a huge deal... think about what happens if tensions escalate?! 
It's not like it hasn't been said before... and yet we still have to deal with the fallout. So yeah, I'm all about being optimistic (ish) but also super aware of the risks. This is gonna be a wild ride 