Financial analysts have shifted from discussing the “Trump put” to analyzing the “Merz spurt” following Friedrich Merz’s decision to cut a deal on ditching Germany’s debt brake, allowing for potentially unlimited borrowing to fund Europe’s defense. This decision has lifted European markets, with bond yields rising but the euro and European stocks also seeing gains. The move comes as part of a larger EU push to “ReArm Europe” in response to the US’s isolationist turn under Donald Trump.
Meanwhile, Trump’s administration has continued its aggressive stance on tariffs, imposing them on countries like Canada and Mexico despite previous trade agreements. The US Treasury Secretary argues that these tariffs are an effort to make free trade fairer, addressing what they see as imbalances in trade relationships. The EU is preparing for further tariffs on steel, aluminum, and other products, with potential retaliation measures in place if needed.
Europe is bracing for potential economic impacts as a result of these tariffs, with analysts warning of potential recession if trade imbalances are not addressed. The UK, while not currently the target of US tariffs, may still face challenges in the form of other policies like the digital services tax. Overall, the global trading system remains in a state of uncertainty due to Trump’s continued use of tariffs as a negotiating tool, making the future outlook “tariffying”.
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