Weekly economic commentary: Tariff turmoil

Wells Fargo Research Team Wells Fargo

Summary

United States: Tariff turmoil

The U.S. economy added 151K jobs in February accompanied by higher unemployment and lower labor force participation. Economic developments elsewhere reflected heightened uncertainty around trade policy, prompting a leap in imports, concerned industry comments and reports of higher input prices.
Next week: JOLTS (Tue.), CPI (Wed.), Federal Budget (Wed.)

International: Simulating the economic impact of tariffs

In an effort to proactively assess the economic impact of changes to U.S. and international trade policy, we modeled two new tariff scenarios. The more aggressive and contentious simulation—defined by aggressive tariff hikes and matching retaliation—leads to global recession in 2026 and sharp economic downturns in Canada and Mexico.
Next week: Tariff Talk (Mon.-Fri.), Bank of Canada Rate Decision (Wed.), Brazil Inflation (Wed.)

Interest rate watch: What to make of the 10-year treasury yield?

The 10-year Treasury yield has fallen sharply to start the year. The yield on the 10-year note began 2025 around 4.6%, and it got as high as 4.8% in mid-January. But over the past couple of months, a more dour economic outlook amid an escalating trade war have pushed yields down to roughly 4.26% as we went to print. Have longer-term yields fallen too far too fast?

Topic of the week: Don't set your expectations too high

Tariffs pose upside risks to inflation, as the additional levies could be passed through to selling prices. Expectations for price growth in 2025 are recalibrating in response. Across several surveys and market-based measures, short-term inflation expectations have moved higher in recent months.

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Wells Fargo Research Team

Wells Fargo

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.