April 2025

The last month was marked by intensifying geopolitical flashpoints and a dramatic escalation in protectionist trade policy, most notably President Trump’s sweeping new tariffs on imports, which triggered a sharp global market sell-off. Investor sentiment swung wildly as concerns over a trade-induced recession, inflationary pressure, and policy missteps collided with a deteriorating geopolitical backdrop, culminating in one of the most volatile months since the pandemic era.

Trump’s announcement on 2 April of blanket 10% tariffs on all US imports – as well as punitive rates of up to 245% on Chinese goods - sent shockwaves through financial markets and international trade systems. The tariffs, justified by the administration as measures to “restore economic sovereignty,” catalysed a global pullback in manufacturing activity, prompted retaliatory rhetoric from key trading partners, and sowed fresh doubt about the viability of globalisation. Markets responded with swift selloffs, currency shifts, and a flight to safe havens, revealing the fragility of an interlinked global economy under siege from economic nationalism. 

April’s geopolitical tensions played out across a range of fault lines. Russia reignited hostilities in Ukraine with a coordinated spring offensive, targeting Sumy, Kharkiv, Donetsk, and Zaporizhzhia. Ukrainian claims that captured fighters included Chinese nationals hinted at Beijing’s tacit involvement, rattling Western capitals. In South Asia, a deadly attack in Kashmir triggered a fierce diplomatic and military standoff between India and Pakistan, with threats of escalation disrupting regional stability. Meanwhile, the Red Sea saw a flare-up in Houthi-US hostilities, leading to US strikes and maritime security concerns. However, it was the US trade offensive that had the most systemic impact. Trump’s tariffs, framed as a reassertion of American economic dominance, sparked global reprisal threats and upended multinational supply chains. US allies, including the UK and EU, expressed concern over the unpredictability of Washington’s stance, even as the UK moved to strengthen its strategic partnership with Europe, distancing itself from the US’s protectionist pivot.

Faced with the dual challenge of geopolitical instability and a trade-driven economic shock, central banks reacted with varying degrees of urgency. The US Fed kept rates steady, though Q1 GDP showed a 0.3% contraction and core inflation rose to 2.6%. Markets interpreted the Fed’s posture as cautiously dovish, anticipating potential rate cuts should trade friction worsen. In the UK, the Bank of England signalled forthcoming easing, with the Governor suggesting that tariffs could act as a deflationary force in the British economy by depressing global demand. The Bank indicated room for up to 100 basis points of cuts over the next half year. The European Central Bank was quicker off the mark, trimming rates by 25 basis points to 2.25%, citing declining growth forecasts and the need to contain volatility across eurozone economies heavily exposed to global trade. Central banks, caught between inflation risk and recession fears, are now navigating one of the most complex environments in a decade.

Global equities endured a turbulent April. The US market’s initial response to the tariff announcement was swift and brutal: the S&P 500 and Nasdaq each shed more than 10% in two trading sessions, while the Dow Jones dropped over 4,000 points. The market’s volatility gauge, the VIX, soared to 60, its highest since early 2020. The rout was temporarily halted when the administration paused some tariff increases on 9 April, prompting a historic rebound. The S&P 500 surged 9.5% in a single day-its best session since the 2008 financial crisis – buoyed further by strong tech earnings. Despite this volatility, by close of month, the equity markets were broadly unchanged, with the S&P500 down 0.6% and the Nasdaq up 1.0%. While in Europe, the FTSE 100 was down 1.0% and the Dax up 1.5%.

Commodity markets reflected the ongoing chaos and by the end of the month, the Bloomberg Commodity Index was down 4.8%. Oil prices were largely responsible, with the WTI falling 18.5% and Brent down 15.6%, moved by concerns about an economic slowdown and OPEC+ unexpectedly raising output by over 400,000 barrels per day - analysts speculated this was a political gesture aimed at reducing US import costs in light of the new tariffs. Copper tumbled 8.4%, its worst monthly fall in nearly three years, as Chinese industrial demand faltered and global manufacturing orders fell. Agricultural markets suffered: US soybean and pork exports collapsed due to retaliatory Chinese tariffs, with mid-April soybean sales down 50% week-on-week. Conversely, gold surged as investors sought sanctuary from market turmoil, hitting record highs amid safe-haven demand and central bank accumulation, and by the end of the month stood at $3288, an increase of 4.2%.

The USD weakened considerably in April as traders reassessed the US economic outlook under the weight of isolationist trade policy. The EUR climbed from $1.08 to $1.1523 before settling at $1.1373, marking its strongest performance against the USD in over a decade. This reflected not only market aversion to the dollar but renewed confidence in eurozone policy coordination. GBP also gained, rising to $1.3444 by month-end. The UK’s relative insulation from US-China supply chains and the Bank of England’s more cautious stance on rate cuts contributed to sterling strength.

Bond markets swung wildly as investors first sought safety and then panicked over inflation and fiscal uncertainty. US 10-year Treasury yields fell from 4.24% to 3.86% following the equity crash but surged to 4.5% by 9 April - the largest three-day increase since 1982 -as margin calls and inflation fears took hold. The 30-year yield also climbed, signalling concern over the US fiscal outlook as tariff-induced revenues were offset by stimulus promises. By month-end, yields stabilised at 4.37% (10-year) and 3.74% (2-year).

Cryptocurrencies proved resilient in April, outperforming traditional assets in many cases. Bitcoin rose 12.5% for the month, from a low of $76,000 to end $94,316, benefiting from renewed interest as a hedge against fiat currency instability and protectionist economics. The US government’s decision to establish a strategic Bitcoin reserve added legitimacy to institutional narratives and speculation of long-term adoption.