North America
- The S&P 500 officially entered a correction after plunging 10% in just 16 days, marking the seventh-fastest decline since 1929, with similar rapid selloffs occurring under President Trump in 2018 and 2020. Last week the index fell again, extending a three-week rout that has wiped out trillions in market value, while the Nasdaq 100 has dropped over 10% since Trump’s return to office. Technical indicators suggest oversold conditions, with the index’s 14-day relative strength index hovering near 30, but Dow Theory signals further downside as the Dow Transports index has fallen nearly twice as much as the Dow Industrials. Meanwhile, credit markets are flashing recession warnings, as hedging costs on high-yield debt have surged and multiple companies have postponed bond sales amid growing trade concerns. Trump’s tariffs have been a contributing factor to market volatility, with 25% tariff on global steel and aluminum imports going into effect on March 12th, prompting retaliatory tariffs from Canada and the EU, heightening fears of a trade war. Trump has also introduced 25% tariffs on goods from Canada and Mexico, with some exemptions under the USMCA, while reducing certain tariffs on essential imports like potash to mitigate economic impacts.
- Secretary of State Marco Rubio announced that 83% of USAID programs would be canceled following a six-week review, affecting 5,200 contracts worth tens of billions of dollars. The cuts, aimed at better aligning USAID’s efforts with U.S. national interests, will leave about 1,000 programs under the State Department’s management. This includes the termination of key health programs, such as HIV, tuberculosis, and malaria treatments, along with nutrition aid for infants in developing nations. The decision sparked controversy, with critics warning of severe global consequences and a wave of lawsuits challenging the cuts, while a Supreme Court ruling blocked halting $2 billion in aid payments to other countries.
- Mark Carney won Canada’s Liberal Party leadership election, securing nearly 86% of the vote, and is expected to be sworn in as Canada’s next prime minister within days. He replaces Justin Trudeau, who resigned in January following a decline in approval ratings. Carney, a former central banker and economist with a history at the Bank of Canada and Bank of England, will lead Canada through the upcoming general election, which must be held by October 20th. His victory comes amid rising anti-Trump sentiment and political polarization, with Carney vowing to confront U.S. tariffs and assert Canada’s sovereignty.
- The U.S. imposed 25% tariffs on Canadian exports and 10% on energy imports, citing national security concerns, followed by additional 25% tariffs on Canadian steel and aluminum on March 12th. In response, Canada implemented roughly $30 billion in counter-tariffs on U.S. goods, including steel, aluminum, food products, and consumer goods, effective March 4 and expanded on March 13. The Canadian government introduced economic relief measures, including $5 billion in trade support, $500 million in business loans, and $1 billion in agricultural financing. Officials urged Canadians to buy domestic products while considering further non-tariff retaliatory options if the U.S. maintains its trade restrictions.
- Market Implications: U.S. markets are experiencing significant turbulence due to recent trade policies and evolving diplomatic relations. Increased tariffs on imports from Canada, China, and Mexico have led to significant declines in stock markets, heightening investor anxiety and market volatility. The tariffs have strained diplomatic relations, disrupted supply chains, increased production costs, and dampened consumer confidence, with financial institutions raising recession risk assessments for 2025. The Trump administration’s overhaul of USAID has resulted in the cancellation of many programs, potentially impacting U.S. farmers and reducing demand for American agricultural products. In retaliation to U.S. tariffs, Canada imposed a tariff on electricity exports, contributing to market volatility.
Europe
- Ukraine agreed to a Trump administration-backed 30-day cease-fire with Russia during negotiations in Jeddah, Saudi Arabia, where the U.S. also announced the immediate resumption of military aid and intelligence sharing with Kyiv after previously suspending it due to a contentious White House meeting between Presidents Trump and Zelensky. Secretary of State Marco Rubio stated that the cease-fire proposal now depends on Russia’s approval, while British Prime Minister Keir Starmer hailed the agreement as a major step toward peace, though President Putin has signaled that he may demand additional concessions. These talks came in the aftermath of the infamous February 28, 2025, meeting between President Trump, Vice President JD Vance, and Ukrainian President Volodymyr Zelensky in the Oval Office. In the meeting, which was aired publicly, both Trump and Vance criticized Zelensky for not showing enough gratitude for U.S. aid and pressured him to accept a peace deal with Russia.
- The German federal election on February 23 saw Friedrich Merz’s center-right Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), secure 208 seats in the 630-seat Bundestag, followed by the far-right Alternative for Germany (AfD) with 152 seats, the Social Democrats (SPD) with 120 seats, and the Greens with 85 seats. Merz, the likely next chancellor, announced a sweeping budget deal allowing up to €500 billion ($544 billion) in infrastructure spending over a decade, with €100 billion earmarked for climate initiatives and defense spending exemptions from debt restrictions. The agreement, supported by the SPD and Greens, enables Germany to spend beyond its traditional borrowing limits, including an immediate €3 billion aid package for Ukraine. Merz framed this as a response to U.S. security retrenchment under President Trump, emphasizing that “Germany is back” and must lead in defending European security. Additionally, Merz called for greater European strategic independence from the U.S., aligning with French President Emmanuel Macron’s vision, though legal challenges from the AfD and the Left Party remain a potential hurdle.
- Ursula von der Leyen, president of the European Commission, proposed a significant increase in European defense spending by up to €800 billion, including a €150 billion loan program, to enhance the continent’s military capabilities amid concerns over reduced U.S. support for Ukraine and pressure from former President Trump for Europe to bolster its own defense. The proposal, which includes loosening budget rules and redirecting existing funds, aims to address immediate needs in Ukraine and long-term European defense against a potentially more aggressive Russia, though decisions will ultimately rest with European Union (EU) member states under financial strain. Presented ahead of a crucial EU leaders’ meeting, the plan involves creating a defense fund, offering budget flexibility, and repurposing capital, but lacks specifics on broader collaborations with non-EU countries like Britain and Norway, and immediate aid details for Ukraine. While signaling a policy shift towards rearmament in response to changing global dynamics, the proposal is seen as a starting point, with further details expected in upcoming discussions and a defense paper in March.
- In the Balkans, we are witnessing some political turmoil in Romania and Serbia, creating uncertainty surrounding government stability in both countries. Romania’s Central Electoral Bureau disqualified far-right candidate Calin Georgescu from the May presidential election rerun, citing his violation of democratic principles, following the annulment of the November election due to alleged Russian-backed TikTok propaganda, sparking violent protests in Bucharest. Georgescu, who has surged in popularity through social media and nationalist rhetoric, has garnered support from European far-right leaders and, notably, U.S. figures like Elon Musk and Vice President JD Vance, who criticized Romania’s actions as undemocratic, aligning with Russia’s defense of Georgescu and complicating Romania’s pro-Western stance. Romania’s Constitutional Court upheld the Georgescu’s ban earlier this month, unanimously denying his appeal. Meanwhile, Serbia is facing escalating student-led protests sparked by a deadly railway station canopy collapse in November which demonstrators blame on government corruption and lack of oversight. Since then, the protests have grown into a broader movement against corruption and eroded rule of law, representing the biggest challenge to Serbian President Aleksandar Vučić’s decade-long rule. So far, the student protesters have been peaceful, calling for four things: transparency surrounding the railway disaster investigation; protection of protesters; prosecution of attackers on the students; and a 20% increase to the higher education budget. Some fear a counter-protest by government supporters may lead to clashes.
- Market Implications: The European markets are currently influenced by recent diplomatic engagements between the U.S. and Ukraine, which have introduced cautious optimism for a temporary ceasefire with Russia. This could stabilize energy prices, particularly natural gas, and alleviate inflationary pressures, benefiting energy-dependent industries. However, the uncertainty surrounding Russia’s acceptance of the ceasefire maintains a degree of market volatility. Additionally, EU leaders have pledged significant military enhancements, like Germany’s European Sky Shield Initiative, leading to increased demand for defense manufacturers and stimulating economic activity within the defense sector. However, this also necessitates substantial public expenditure, potentially impacting fiscal balances. Markets are cautious of an trade war with the US after President Trump threatened to put a 200% tariff on European wine and spirits, a move which came in response to a EU plan to impose tariffs on American whiskey and other products next month — which itself was a reaction to Trump’s 25% tariffs on steel and aluminum imports that took effect last week. However, this year EU equities markets continue doing very well. The trajectory shows continued growth as European equities are undervalued, relative to the US markets.
China & India
- China imposed new tariffs on U.S. agricultural products in retaliation for President Trump’s recent tariff hikes, including a 15% levy on chicken, wheat, and corn, and a 10% tariff on soybeans, pork, beef, and fruit. This action followed Trump’s decision to increase tariffs on Chinese imports to 20%, announced the previous week. China also blocked 15 U.S. companies from purchasing Chinese goods and restricted 10 others from operating in the country. Despite these escalations, both the U.S. and China expressed a willingness to negotiate a trade deal, with China’s commerce minister extending an invitation to meet with U.S. trade representatives.
- Beijing set China’s economic growth target for the year at “around 5%” despite challenges from a looming U.S. trade war and sluggish domestic demand. The Chinese government acknowledged difficulties, including weak consumer spending and the impact of U.S. tariffs. In response, China unveiled measures such as a 7.2% increase in defense spending and a shift towards a more proactive fiscal policy, including a rise in the government budget deficit. President Xi Jinping emphasized the importance of technological innovation to reduce dependency on foreign semiconductors and expand high-tech industries amid growing restrictions on U.S. technology exports.
- India and the EU agreed to finalize a long-pending free trade agreement by the end of 2025, with negotiations set to continue in March. European Commission President Ursula von der Leyen emphasized the deal’s global significance and highlighted the EU’s commitment to strengthening trade, technology, and defense ties with India. The EU remains India’s largest trading partner, with bilateral trade exceeding $130 billion in 2023-24, while over 6,000 European companies operate in India. The agreement gains urgency as the EU faces potential U.S. tariffs under President Trump, and India seeks to diversify trade partnerships following its 2024 trade deal with the European Free Trade Association.
- Indian Prime Minister Narendra Modi affirmed India’s support for Mauritius’ sovereignty over the Chagos Islands amid ongoing negotiations between the U.K. and Mauritius over the fate of the U.S.-U.K. military base on Diego Garcia— which Modi believes should be maintained as it is in India’s interest. The U.K. agreed in October 2024 to return Chagos to Mauritius while maintaining the military base for 99 years, a deal backed by U.S. President Donald Trump and British Prime Minister Keir Starmer. Modi and Mauritian Prime Minister Navinchandra Ramgoolam also announced a joint vision to strengthen cooperation in space, AI, cybersecurity, and maritime security, reinforcing India’s strategic presence in the Indian Ocean. Meanwhile, U.S. Commerce Secretary Howard Lutnick urged India to lower its high tariffs and open sectors like agriculture, proposing a bilateral trade deal ahead of Trump’s planned reciprocal tariffs in April. Prime Minister Narendra Modi and Trump recently agreed to resolve tariff disputes and aim for $500 billion in bilateral trade by 2030.
- Market Implications: In response to the Trump administration’s decision to increase tariffs on Chinese imports from 10% to 20%, China’s counter-tariffs aim to protect domestic industries and reduce reliance on U.S. imports, with increased sourcing from alternative markets like Russia and Australia. China’s 5% GDP growth target for 2025 focuses on boosting domestic consumption, technological innovation, and infrastructure investments, despite challenges from ongoing trade tensions and deflationary pressures. The incentives outlined by the Chinese government may continue posting returns in Chinese markets while the Indian equities market may be reaching a plateau. The EU and India are negotiating a Free Trade Agreement (FTA) to enhance trade and investment. The FTA aims to reduce existing trade barriers, although challenges persist, particularly concerning the EU’s environmental policies. Successful implementation could boost trade flows, reduce tariffs, and enhance market access, strengthening the economic partnership between the EU and India.
