Chart of the Week: A European revival and/or an American downturn?

Faced with uncertainty over the new administration’s tariff policy, US stock markets are weakening. As outlined in Fathom’s Global Outlook, Spring 2025, European economies could also be hit hard due to American tariffs. However, despite this lingering threat, mid-to-large cap German stocks have outperformed (as have small caps, albeit to a lesser extent). Most recently, discussions of loosening a long-held ‘debt brake’ to boost defence and infrastructure spending has further supported financial markets in Germany. Across the Atlantic, tariffs on Canada, Mexico and China have resulted in a sharp decline in US stocks, as threats of a trade war and associated damages to the US economy increase. There was hope of some recovery after it was announced that tariffs on autos trade have been paused for a month, but traders continued the sell-off as the uncertainty surrounding tariff policy mounts. Looking forward, financial markets will be keeping a keen eye on the second round of tariff announcements, scheduled for early April.

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The views expressed in this article are the views of the author, not necessarily those of LSEG.

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