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On May 8, 2025, President Donald Trump celebrated a landmark US-UK trade agreement, boosting market access and economic ties, while signaling potential tariff reductions with China ahead of crucial weekend talks. Criticizing Federal Reserve Chair Jerome Powell for holding rates steady, Trump argued that rate cuts would provide “jet fuel” to supercharge the economy, contrasting the Fed’s caution with global easing trends. The trade deal and China optimism lifted markets, despite tariff-driven risks, reshaping global trade dynamics. This report explores Trump’s trade strategy, its market impact, and the Fed’s cautious stance.
US-UK Trade Deal Sparks Optimism
The US-UK trade agreement, described by Trump as a “breakthrough,” removes non-tariff barriers, streamlines US goods through UK customs, and opens markets for American beef, ethanol, chemicals, and machinery. It generates $6 billion in US revenue from a 10% tariff and $5 billion in export opportunities, creating an aluminum and steel trading zone and securing pharmaceutical supply chains. Aligning the UK with US economic security goals, the deal ensures efficient, bureaucracy-free trade. The Pound Sterling rose 0.15% to 1.3300, and the Dow Jones climbed 0.7% to 41,113, reflecting market enthusiasm for the pact’s economic potential.
China Trade Talks and Tariff Flexibility
Trump expressed confidence in US-China trade talks set for May 10-11 in Switzerland, led by US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. Suggesting that tariffs on China, capped at 145%, could be lowered to foster competition, Trump anticipated a “friendly” meeting, possibly with President Xi Jinping afterward. This follows tensions from Trump’s 100% tariffs on foreign films and planned pharmaceutical duties, which have stoked inflation fears (2.6% in March). Improved risk sentiment pushed gold prices down 1.5% to $3,364, while the US Dollar held firm at 99.89, supported by trade hopes and Fed policy.
Trump’s Call for Fed’s “Jet Fuel”
Trump sharply criticized Powell, arguing that the Fed’s decision to maintain rates at 4.25%-4.50% stifles growth, while rate cuts would act as “jet fuel” for the economy. He contrasted the Fed’s stance with rate reductions by the Bank of England (to 4.25%) and China, which are easing to mitigate tariff impacts. Powell’s press conference underscored tariff-driven inflation risks, with April’s Prices Paid Index at 65.1, and a strong labor market (177,000 Nonfarm Payrolls, 4.2% unemployment), justifying the pause. Markets price in a 62% chance of a July cut, keeping the Dollar resilient above its 200-day moving average of 99.50, though Trump’s push for cuts highlights policy friction.
Geopolitical and Trade Maneuvers
Trump announced a rare earth deal with Ukraine and plans to confer with President Volodymyr Zelenskyy, bolstering resource security amid global tensions. He stressed protecting US steel with an “uneasing” tariff stance, while the US-UK deal’s aluminum and steel zone addresses global oversupply. The pharmaceutical supply chain focus counters tariff disruptions, aligning with Trump’s broader trade agenda, though he ruled out similar concessions for autos. The S&P 500 gained 0.2% to 5,617, and small-cap stocks surged 1.57%, driven by trade optimism and robust corporate earnings.
Market Outlook and Technical Levels
The GBP/USD, supported at 1.3250 and facing resistance at 1.3400, benefits from the US-UK deal and the BoE’s hawkish cut. The US Dollar, with support at 99.00 and resistance at 100.00, remains robust but faces pressure from potential tariff relief. Gold, range-bound between $3,350-$3,400, could target $3,500 if geopolitical risks escalate, with central bank buying (China, Poland) providing a floor. The Dow, nearing 41,600, eyes resistance at 42,000, with PMI and US-China talk outcomes pivotal. Trump’s trade wins, paired with his call for the Fed’s “jet fuel,” signal opportunity, but Powell’s caution and tariff risks require careful navigation.
