Take Two: Markets rally on US-China tariff reductions; Eurozone GDP grows less than expected
- 19 May 2025 (3 min read)
What do you need to know?
Global stock markets rallied last week after the US and China agreed to cut tariffs on their respective imports by 115% for 90 days. This means the increase in US tariffs on Chinese imports under President Donald Trump falls from 145% to 30% and China's reciprocal tariffs on the US ease from 125% to 10%. Markets welcomed the news with the S&P 500 index up 5% while the MSCI World was 4% higher in the week to Thursday’s close, although the US dollar did not mirror this recovery.1 Meanwhile US annual inflation eased to 2.3% in April, its lowest reading since February 2021, and down from 2.4% in March, indicating the full tariff impact has yet to be felt.
- SW4gVVMgZG9sbGFyIHRlcm1zLiBTb3VyY2U6IEZhY3RTZXQsIGFzIG9mIDE1IE1heSAyMDI1
Around the world
The Eurozone economy grew by 0.3% in the first quarter (Q1), on a quarterly basis, in line with AXA IM’s preliminary estimate and revised down from an earlier estimate of 0.4% - following 0.2% expansion in the final three months of 2024. Meanwhile, UK economic growth picked up markedly in Q1, increasing 0.7% on a quarterly basis, up from Q4’s 0.1% and above market expectations of 0.6%. The growth reflected an increase in consumer spending and business investment ahead of impending tariff changes although AXA IM expects this boost to prove temporary. Elsewhere, Japan GDP contracted for the first time in a year in Q1, falling -0.2% on a quarterly basis, down from 0.6% growth in Q4.
Meanwhile, UK economic growth picked up markedly in Q1, increasing 0.7% on a quarterly basis, up from Q4’s 0.1% and above market expectations of 0.6%. The growth reflected an increase in consumer spending and business investment ahead of impending tariff changes although AXA IM expects this boost to prove temporary. Elsewhere, Japan GDP contracted for the first time in a year in Q1, falling -0.2% on a quarterly basis, down from 0.6% growth in Q4.
Figure in focus: $2.1trn
International tourism spending is forecast to reach a record $2.1trn this year, surpassing 2019’s peak of $1.9trn, with the travel and tourism sector expected to account for 10.3% of global GDP, at some $11.7trn, according to the World Travel & Tourism Council (WTTC). However, WTTC research highlighted that international visitor spending to the US is “projected to fall to just under $169bn this year, down from $181bn in 2024”, marking a 22.5% decline compared to its previous peak – and the only nation analysed which is forecast to see international visitor spending drop this year.
Words of wisdom
Agentic AI: An advanced form of artificial intelligence (AI) that can operate independently, learn, and make decisions without the need for continuous manual instruction or intervention. While agentic AI, like generative AI, benefits from vast amounts of data and sophisticated large language models, its greater autonomy provides it with increased abilities to rapidly collect data, act, analyse, and learn how improve its own performance, opening up new opportunities. Increasingly, businesses are turning to agentic AI to improve efficiency, boost productivity and to adapt to evolving trends and dynamics in the workplace.
What's coming up?
On Monday, the Eurozone issues its final inflation estimates for April while on Tuesday the Reserve Bank of Australia meets to decide on interest rates and Canada publishes its own inflation data. The UK follows with its latest inflation numbers on Wednesday and a spate of flash Purchasing Managers’ Indices are published on Thursday, including those covering the Eurozone, US, UK and Japan. Thursday also sees Germany's closely watched Ifo Business Climate Index published. On Friday Japan reports inflation data.
Disclaimer
The information on this website is intended for investors domiciled in Switzerland.
AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.
This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.
AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.
The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.
Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.
AXA Investment Managers Switzerland Ltd.