This week's economic calendar is packed with important events, including potential US tariff actions as the White House weighs tariff actions on its largest trade partners. Recall that President Trump signaled that the Administration would implement 25% tariffs on Canada and Mexico as well as another 10ppts on China on Tuesday in response to those countries' failure to stem the flow of illegal drugs into the US. Barring any last minute negotiations, these tariffs are expected to come into effect; US commerce secretary Lutnick said on Fox yesterday that they will be implemented but that the level is still being decided. That could signal some room for the 25% on Canada and Mexico to be lower. On top of that Trump is set to address a joint session of Congress outlining his agenda tomorrow, his first such speech since his inauguration last month.
The fallout from an extraordinary televised row on Friday in the Oval Office between Trump and JD Vance on one hand and Zelenskiy on the other will also be a big talking point. Yesterday we had a large number of NATO countries' leaders convene in London for an emergency (another!) summit on Ukraine. This was planned before Friday's argument in the White House but it took on added importance after the clash. There was a lot of solidarity for Ukraine after the meeting but a lot still hinges on the US's involvement.
In Germany things are moving fast after the election and speculation has increased over special funds for defence and infrastructure being established while the existing parliament sits rather than wait for the new one where centrist policies won't have the two-thirds majority to reform the debt break on their own. Reuters reported yesterday that economists advising the talks have suggested the need for a EU400bn fund for defence and a EU400-500bn one for infrastructure. If this actually occurs before the new coalition is formed it will be a real positive "shock and awe" for Germany and Europe. Let's see what we hear on this in the coming days. Things continue to move at pace in Europe and after we paraphrased Lenin's famous "There are decades where nothing happens; and there are weeks where decades happen" quote two weeks ago, after the Munich Security Conference, the phrasing might need to be updated from weeks to days!
In terms of the data, the main focus will be on the US jobs report (Friday) and ISM indices in the US (today and Wednesday). Powell has a keynote economic speech on Friday to look forward to.
In Europe, the ECB will likely cut rates a further 25bps on Thursday, the same day as a special EU summit on defence and Ukraine is set to take place. It's getting hard to keep up with all these summits and emergency meetings. MNI sources yesterday suggested that we will hear about a EU100bn common funding for defence at this meeting which is a mere drop in the ocean as to what Europe will likely need to spend on defence in the next several years.
In China we will get the annual session of 14th NPC starting on Wednesday where the government is expected to outline its plans for 2025 including targets for the fiscal deficit and government bond issuance (full preview to follow). In Japan, the release of the annual shunto wage hike demands by labor unions on Thursday is a key event.
As earnings season winds down after 485 of the S&P 500 and 310 of the Stoxx 600 have now reported, maybe keep an eye out for Broadcom's results on Thursday which is the next cab off the ranks in terms of the Mag-7 or a firm member of the BATMMAAN group of stocks. Their market cap briefly went above Tesla last week and is only just behind now.
Going through a couple of the main events this week in a little more detail now and all roads point to the tariff deadline tomorrow and payrolls on Friday. DB economists have previously said that 25% tariffs on Canada and Mexico, If sustained, would likely create a 0.4-0.7ppts drag on 2025's US GDP and boost core PCE by 0.3-0.7ppts. It is possible that the revenues from the tariffs allow for larger US tax cuts which may help reduce the growth impact but we're also starting to see some of the trade uncertainty hit confidence so there are a lot of moving parts. Overall, it's hard to see China tariffs being negotiated lower but there's still a chance that those on Mexico and Canada are lower than 25% as hinted by Lutnick yesterday. We will see today.
With regards to payrolls, our economists expect headline (160k forecast vs. 143k previously) and private (150k vs. 111k) payroll gains to rebound from weather-related and potential seasonal-factor related drags in the prior month. However there is a drag factored in from the start of federal government layoffs even if March may see a larger impact. DB think the unemployment rate will tick up a tenth to 4.1%. Today's manufacturing ISM (DB at 51.8 vs. 50.9 last month) and Wednesday's services ISM (DB at 52.1 vs. 52.8) will have employment components that along with Wednesday's ADP report may sharpen the street's forecasts as the week progresses.
Courtesy of DB, here is a day-by-day calendar of events
Finally, looking at the just the US, the key economic data releases this week are the ISM manufacturing and services reports on Monday and Wednesday and the employment report on Friday. Tariffs on Mexico, Canada, and China are scheduled to take effect on Tuesday. There are several speaking engagements by Fed officials this week including Chair Powell and Governors Waller, Bowman, and Kugler.