Closing summary
Time to wrap up, after another day in which Donald Trump has moved the markets.
European carmakers’ shares have slid today after the US president said he planned to impose 25% tariffs on EU imports soon.
The selloff has intensified through the day – BMW are now down 4% on the Frankfurt stock market, followed by Porsche (3.6%).
Analysts at the Kiel Institute warned that new tariffs would hurt both the European and US economies, especially if the EU retaliated.
And the European Central Bank pointed out that eurozone businesses could suffer if cheap Chinese goods flooded to Europe rather than into the US.
The US dollar has rallied against other major currencies, after Trump announced that tariffs against Mexico, Canada and China will kick-in next week.
Matthew Ryan, head of market strategy at global financial services firm Ebury, says:
“The dollar is trading higher across the board this afternoon after President Trump cooked up another storm on his Truth Social account, proclaiming that tariffs aimed at Canada and Mexico would go ahead as planned next week.
Markets have been caught wrong-footed by the news, seemingly due to the belief that these levies would again be delayed and/or watered down relative to his initial threats – alas, there is no sign of that at this stage.
Our US Politics Live blog has more details:
A surprise jump in the number of Americans filing new claims for unemployment support has raised concerns that the US economy could be slowing.
Elsewhere today…
Gatwick has been given a qualified green light to operate a second runway after the government “set out a path to expansion” for London’s second biggest airport.
But, the deadline for the government to make a final decision has been extended to late October….
Rolls-Royce has said it will return £1.5bn to shareholders as the British jet engine manufacturer paid its dividend for the first time since the coronavirus pandemic. Its shares have soared 15% to a new alltime high.
But advertising firm WPP’s shares have slumped 15%, after it reported a slowdown in activity at the end of laast year.
Key events
Kyle Chapman, FX markets analyst at Ballinger Group, says Trump’s post has shaken the markets out of their complacency about tariffs:
“The dollar has surged today after a Truth Social post in which Trump assured markets that the Mexico and Canada 25% blanket tariffs would indeed be implemented on Tuesday. He also threw in an extra 10% on China for good measure.
“A complacency has built up in markets since the first tariff delay, and that always meant that a big correction was on the cards if calling Trump’s bluff turned out to be the wrong move. Before yesterday the euro was priced as if there was no longer any tariff risk, and Trump appears to be hell-bent on rectifying that this week. Much has been said about the market’s fatigue in responding to each and every tariff headline – that is not what is on display today.
“I am not going to pretend that I have any accurate foresight on where the tariff story goes from here. For a while there, investors seemed to think that they had figured Trump out. But the unknowability of Trump’s eventual policy moves is going to feed into higher volatility for some time.
“The chances are small at this stage, but for what it’s worth I think there is still time for a trade war to be avoided. That tariffs will be in place ‘until [the flow of fentanyl] stops, or is seriously limited’ sounds like a possible off-ramp to me.”
Dollar rallies as Trump says Mexico, Canada and China tariffs will start on 4 March
Newsflash: Donald Trump has announced that his proposed tariffs on Mexico and Canada will go into effect on 4 March, dashing hopes of another delay.
Trump has also revealed that the planned additional 10% tariff for China will kick in on the same day, next Tuesday.
Trump had delayed the introduction of new 25% tariffs on Mexico and Canada at the start of this month, after both countries pledged to boost their efforts to police their borders.
But today, Trump claims that illicit drugs are still pouring into the US from Mexico and Canada “at very high and unacceptable levels.”
Writing on his Truth Social site, Trump says:
“We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled.
China will likewise be charged an additional 10% Tariff on that date.
The April Second Reciprocal Tariff date will remain in full force and effect. Thank you for your attention to this matter. GOD BLESS AMERICA!
The news has driven up the value of the US dollar by around 0.6% against a basket of currencies.
The pound has dropped by a third of a cent to $1.264, while the euro is down half a cent at $1.0437.
New tariff news – In addition to the 25% Canada and Mexico tariffs taking effect March 4, Trump now says China will see an “additional” 10% take effect that day as well.
Comes on top of the 10% that took effect less than a month ago. pic.twitter.com/VPMuVIPJxd
— Megan Cassella (@mmcassella) February 27, 2025
The jump in US jobless claims last week doesn’t appear to be driven by Elon Musk’s ‘department of government efficiency’ program, which has been laying off government staff.
Today’s report says:
Initial claims for UI benefits filed by former Federal civilian employees totaled 614 in the week ending February 15, an increase of 1 from the prior week.
Claims:
1/ Federal jobless claims not showing an obvious impact of the layoffs yet (though the data we have is a little early for that – week ended 2/15): pic.twitter.com/7ALU6ziOul
— Guy Berger (@EconBerger) February 27, 2025
Rise in US initial claims for jobless support
The number of Americans filing new claims for unemployment benefits has risen to its highest level this year.
A total of 242,000 initial claims were filed in the week to 22 February, up from 220,000 in the previous week.
That’s the highest level since the first week of December, when 242,000 initial claims were also recorded.
It’s also a bigger jump than expected – economists had expected only a small rise, to 221,000.
It may show that US firms are getting more nervous about economic prospects, and laying off staff.
The repoort says the largest increases in initial claims for the week ending February 15 were in Kentucky (+3,012), Tennessee (+2,766), Washington (+735), Michigan (+452), and Minnesota (+83), while the largest decreases were in California (-5,530), Pennsylvania (-1,110), Florida (-981), New Jersey (-903), and New York (-698).
Donald Trump’s tariff threats towards Europe have become “more concrete”, say analysts at ABN AMRO, following last night’s threat to impose a 25% levy.
They add:
We estimate the. eurozone and the US stand to take a 1.3% and 0.5% GDP hit from these tariffs.
ECB: Global trade might be hit hard by tariffs
Policymakers at the European Central Bank were concerned about the impact of new US tariffs on the eurozone, when they met last month.
The minutes of the ECB governing council’s last meeting, in late January, have just been released, and show concerns about new trade restrictions.
The minutes say:
Members concurred that the outlook for the international economy remained highly uncertain. The United States was the only advanced economy that was showing sustained growth dynamics. Global trade might be hit hard if the new US Administration were to implement the measures it had announced.
The ECB was also conscious that more low-price Chinese goods could be sent to Europe, due to US tariffs, which would push down inflation but hurt European manufacturers.
The ECB’s minutes say:
The challenges faced by the Chinese economy also remained visible in prices. Chinese inflation had declined further on the back of weak domestic demand. In this context, it was pointed out that, no matter how severe the new US trade measures turned out to be, the euro area would be affected either indirectly by disinflationary pressures or directly, in the event of retaliation, by higher inflation.
In particular, if China were to redirect trade away from the United States and towards the euro area, this would make it easier to achieve lower inflation in the euro area but would have a negative impact on domestic activity, owing to greater international competition.
The oil price has risen today, after Donald Trump cancelled a license given to energy giant Chevron to operate in Venezuela.
US crude oil is up 0.9% at $69.23 per barrel, while Brent crude, the international benchmark, is up 1% at $73.22 per barrel.
Trump announced yesterday that a permit issued by the US government allowing Chevron to pump and export Venezuelan oil will be terminated this week, which will end a financial lifeline for the South American country.
The US president accused his Venezuelan counterpart, Nicolás Maduro, of not meeting democratic conditions.
Trump wrote on his Truth Social site:
“We are hereby reversing the concessions that Crooked Joe Biden gave to Nicolás Maduro, of Venezuela, on the oil transaction agreement.”
Kiel: Trump’s tariff threats on EU could trigger economic turmoil
Both the European and US economies would suffer from a new trade war, the Kiel Institute for the World Economy has warned today.
A simulation created by the Kiel Institute has calculated that there would be economic contraction in both the EU and the United States if the US imposed 25% tariffs on European goods.
The economic damage would be worse if Europe retaliated with its own tariffs.
The Kiel Institute says:
According to the simulations, the European economy would shrink by an average of 0.4 percent in real GDP terms within the first year, a significant impact for a short-run scenario.
The U.S. itself would not be spared, experiencing a contraction of 0.17 percent.
Should the EU retaliate with its own 25 percent tariffs, the economic damage to the U.S. would double and increase own costs for the EU by another 0.14 percentage points. Furthermore, price levels in the U.S. could increase by up to 1.5 percent due to higher costs for imported final goods and intermediate inputs, making domestic production more expensive and reducing overall competitiveness.
Kiel’s calculations show that European exports to the US would decline by 15% to 17% in the first year, including 20% plunge in Germany’s sales to the US.
In other trade news, France’s industry minister has called for more protection for Europe’s steel sector.
Marc Ferracci told a news conference on the future of the European steel industry that this could include stronger safeguard measures.
Ferracci says:
“The European industry and the steel sector need protection, which in the short term means beefing up safeguard measures.”
The existing safeguard measures include tariffs on steel imports over a set quote. Last summer they were extended until June 2026.
Polish prime minister Donald Tusk has responded to US president Donald Trump’s claim that the EU was formed “to screw the United States.”
In a social media post in English, Tusk said:
The EU wasn’t formed to screw anyone. Quite the opposite. It was formed to maintain peace, to build respect among our nations, to create free and fair trade, and to strengthen our transatlantic friendship. As simple as that. 🇪🇺🇺🇸
My colleague Jakub Krupa’s Europe liveblog has more details.
The New Economics Foundation (NEF) has warned that growing Gatwick airport will not create economic growth.
Dr Alex Chapman, senior economist at NEF, says:
“Growing Gatwick will not magic up the economic growth the government so desperately wants. Business air travel has collapsed while expansion will see three times as many tourists leave the country as come in.
“Voters living outside London and the south east will not thank the government for this decision. Expanding airports like Gatwick doesn’t create new jobs – it displaces jobs from the wider UK regions, and particularly the domestic tourism industry which is a key source of spending outside London and the south east.
“The UK is small country with a remarkably high number of international airports. People are already perfectly able to catch cheap flights on holiday or travel for business. If this government is so desperate for growth, it should focus on investing properly in the vital public services upon which the health of our economy really depends.”
The Unite union have welcomed the goverment’s decision to say it is ‘minded to approve’ the expansion of Gatwick.
Unite, which represents 7,000 workers at the airport, believes the expansion should boost highly skilled, well-paid, unionised jobs.
Unite general secretary, Sharon Graham says”
“Unite welcomes the announcement of the expansion of Gatwick but it needs to come with guarantees of well paid, unionised jobs and proper facilities for workers.
“It is also ever more urgent with every airport expansion that we ensure domestic production of sustainable aviation fuel (SAF) to offset carbon emissions and meet the government’s own targets on net zero.
Unite is also pushing for the Grangemouth refinery in Scotland to be upgraded to produce SAF, rather than being closed this summer.
Deadline for the final Gatwick decision extended by nine months
A final decision on Gatwick’s push to open a second runway will not come for several months, though, even though a ‘minded to approve’ letter was released today.
Transport minister Heidi Alexander has extended the deadline for deciding for certain whether Gatwick can turn its back-up emergency runway into a second runway until 27 October.
Alexander says:
The decision to set a new deadline is without prejudice to the decision on whether to give development consent…
Donald Trump’s enthusiasm for tariffs is creating economic uncertainty, and volatility in the finaancial markets.
Dan Ivascyn, group CIO at bond-trading giant PIMCO, explains:
“You do not only have uncertainty here in the United States, but you have a lot of uncertainty in terms of relationships with other countries, impact on markets. And that’s creating not only a lot of localized volatility but volatility across countries, across sectors, across yield curves and that’s a great opportunity as well.
So I think the key theme going into this year is to have a healthy degree of humility around the uncertainty. Acknowledge the uncertainty, but look to take advantage of the full global opportunity set, both within the liquid higher quality areas of the market, as well as in some of the more credit sensitive areas as well.”
