Daily Economic Update

US: New 25% tariff on steel and aluminum imports to be announced today. President Trump said he would announce a new 25% tariff on all steel and aluminum imports (worth around $110bn based on 2023 imports) today, with the timeline for their application unclear for now. Canada, Mexico, and Brazil are among the US’s main steel and aluminum suppliers. He also reiterated his intentions to slap on reciprocal tariffs this week. In addition, he emphasized that measures from Canada and Mexico to curb flows of illegal immigrants and Fentanyl are “not good enough” as he seeks more action before the end of the one-month window, during which his previously imposed 10-25% tariffs are paused. Meanwhile, in the absence of any conciliation, retaliatory tariffs by China, targeting $14bn worth of US goods (based on 2024 trade data) became effective this morning, after the US imposed 10% additional duties on imports from China last week. Markets’ reaction so far in trading this morning has been varied, with Asian equity markets mixed and the dollar higher (DXY). US equity futures were also in green at the time of writing.

Global: Trump’s reciprocal tariffs, US January CPI, and UK Q4 GDP key matters this week. In the US, President Trump is expected to unveil details, possibly on Monday or Tuesday, about his “reciprocal tariffs” approach that he mentioned late last week (on top of the tariffs on some metal imports announced yesterday – see above). This could be a key factor affecting markets, and a glimmer of that reaction was seen on Friday when US stock and bond markets dropped, after that news broke out. Markets will also be focused on Fed Chair Powell’s testimony to Congress on Tuesday/Wednesday, in which he may shed some light on the impact of policy developments on the economy and the path for interest rates. On the data front, the January CPI print is due on Wednesday with the consensus forecast pointing to a slight deceleration in the headline rate to 0.3% m/m (from 0.4% in December) but to a higher core rate of 0.3% from 0.2%. Meanwhile, retail sales (due on Friday) are seen flat in January after a 0.4% m/m rise in December. In the UK, the street and the Bank of England estimate Q4 GDP (Thursday) to have declined by 0.1% q/q following no growth in Q3, as business and consumer spending take a hit from the government’s Autumn budget. Finally in Japan, the producer price index for January will be released on Thursday with consensus expectations pointing to a continued increase to 4.0% y/y, the highest rate since June 2023 and up from 3.8% in December 2024, supporting the case for another BoJ interest rate hike in the summer.

Oil: Brent logs third straight weekly decline amid bearish tariff talk. Brent futures closed lower on Friday for the third consecutive week, settling at $74.7/bbl (-2.7% w/w) and erasing all year-to-date gains amid concerns about an economic growth-threatening trade war between the US and China. Earlier in the week, Trump threatened Canada, Mexico, and China with wide-ranging tariffs, but ended up only applying them to China, which in turn retaliated with 10% tariffs of its own on a small subset of US goods. Nevertheless, the increasing recourse to tariffs has worried investors and the markets, who see global economic and oil demand growth being imperiled. Adding to the negative sentiment was the largest increase in US commercial crude inventories (+8.7 mb w/w in the w/e January 31) in nearly a year. Offsetting some of the bearishness, however, was the Trump administration’s reported intention to apply “maximum pressure” on Iran to drive down the country’s crude exports to zero from the current 1.5 mb/d. Sanctions on Iranian crude flows could provide short-term relief to prices, though with OPEC+ scheduled to start unwinding members’ voluntary supply cuts from April and non-OPEC+ production forecast to grow at a faster rate (+1.4 mb/d) than oil demand this year, the potential loss of Iranian crude supplies may still not be enough to bring the oil market back into balance in 2025.        

Chart 1: Oil prices ($/bbl) Source: Haver

Egypt: Private sector minimum wage to rise by 17% starting March. The National Wages Council has decided to raise the minimum wage for private sector workers to EGP7k per month from EGP6k (+17%) and this will be effective as of March 1. Additionally, the Council set a new, higher minimum for annual bonuses across the private sector. And for the first time, it introduced a minimum wage for part-time employees set at EGP28 per hour. Since May 2024, the private sector minimum wage was raised by 100% from 3.5K to 7.0K per month as a catch-up adjustment to the devaluation, high inflation and high-interest rate environment. The move could also allow for an indirect salary adjustment for other private sector employees (not only those at the minimum wage level) which should allow for a slight push in consumption levels over the coming period especially when coupled with the lower inflationary environment. Moreover, on the public front, the government will announce soon a set of new measures that includes a wage adjustment as well.

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