President Trump confirms tariffs on Canada and Mexico

President Donald Trump announced that a 25% tariff on imports from Canada and Mexico will come into force on 4 March. The tariffs had previously been delayed, giving the affected economies time to take remedial action to reduce the flow of illegal immigrants and drugs across their borders. Canadian energy exports will have a lower tariff, of 10%, applied to them. The President also announced a further 10% tariff on imports from China. Separately, is appears that long-stalled trade negotiations between the US and UK could be re-started, with President Trump saying that a deal between the two nations could be completed “very quickly”.

The second estimate of US Q4 GDP confirmed that the economy grew 2.3% q/q annualized, with a 4.2% expansion in consumer spending. The quarterly estimate of inflation, as measured by the core PCE index, was however revised up on the back of higher service costs, increasing to 2.7% q/q from an initial print of 2.5%.

US durable goods orders jumped sharply in January, rising 3.1% m/m from a 1.8% contraction in December, with the print buoyed by a significant rise in commercial aircraft orders. Core orders for non-defense capital goods (excluding aircraft) also rose by more than expected, gaining 0.8% m/m, possibly in part due to companies bringing forward purchases in anticipation of potential tariffs.

Weekly US initial jobless claims reached their highest level thus far this year, hitting 242k in the week ending 22 February, up from 220k the week prior. The uptick coincides with layoffs at several large US corporations, including the likes of Starbucks and Southwest Airlines.

Today’s Economic Data and Events

• 11:00 TU GDP. Q4. Forecast: 2.5% y/y
• 11:45 FR harmonized CPI, February. Forecast: 1.2% y/y
• 17:00 GE harmonized CPI, February. Forecast: 2.7% y/y
• 17:30 US personal income, January. Forecast: 0.4% m/m
• 17:30 US personal spending, January. Forecast: 0.2% m/m
• 17:30 US PCE, January. Forecast: 2.5% y/y

Fixed Income

• There were small falls in US treasury yields on Thursday. Yields on the 2yr dropped 2bps to 4.0511%, while the 10yr yield was broadly flat at 4.2599%.
• Yields on major European bonds were mostly lower on the day, with the exception of Greece and the UK. The 10yr UK Gilt yield rose 1bps to 4.511%. The 10yr Bund dropped just over 2bps to 2.412%.

FX

• The dollar spot index rose sharply on Thursday, rising almost 0.8%, following President Trump’s commitment to impose tariffs on Canada, Mexico and China. EURUSD fell 0.8% to 1.0398, while GBPUSD declined by 0.6% to reach 1.2601 and USDJPY gained 0.47% to 149.81.
• Commodity currencies fell against the dollar once again on Thursday. Both AUDUSD and NZDUSD dropped 1.1% to 0.6236 and 0.5632, respectively. USDCAD gained 0.7% to 1.4437.

Equities

• US equity markets fell sharply, with tech-stocks struggling after underwhelming Nvidia results and further promises of tariffs. The Dow Jones fell 0.45% and the NASDAQ dropped 2.78%. The S&P 500 declined by 1.6%, erasing all gains made by the index in 2025.
• European equity indices also saw falls on the day, driven by concerns about tariffs. The Eurostoxx 50 fell 1%, the CAC 40 dropped 0.5% and the DAX declined by 1.07%. The FTSE 100 gained 0.5%.
• Locally, the DFM closed 0.17% higher, while the ADX fell 0.43%. The Tadawul declined by almost 1% on the day.

Commodities

• Oil futures reversed declines seen earlier in the week. Brent rose 2.08% to reach USD 74.04/b, and WTI gained 2.5% to USD 70.35/b. President Trump yesterday rescinded Chevron’s license to operate in Venezuela.