Investment market update: April 2025

Once again, US president Donald Trump’s trade tariffs have affected investment markets throughout April 2025 and could have far-reaching implications over the coming months.

Indeed, UN Trade and Development now predicts that global growth will slow to 2.3% in 2025, compared to 2.8% last year.

While experiencing volatility can be daunting as an investor, remember to take a long-term view. Historically, markets have recovered from periods of downturn. However, it’s important to note that investment returns cannot be guaranteed.

Trade tariffs and their effect on the market in April 2025

Since Trump took office in January, uncertainty around trade policies has affected global markets, and these announcements continued to have an effect in April.

On 2 April, markets prepared for key tariff announcements from the US, dubbed “Liberation Day” by the White House.

The speculation led to a European stock sell-off gathering pace, with pharmaceutical shares being particularly affected. The Stoxx 600 healthcare index, which is composed of European businesses in the healthcare sector, fell by around 2.5%.

On “Liberation Day”, Trump announced sweeping two-tier tariffs. A baseline 10% tariff was applied universally to imports from all countries (except Mexico and Canada) and then additional country-specific “reciprocal” tariffs were also applied.

As a result, on 3 April, markets around the world plummeted when they opened – from Tokyo’s Nikkei (-3.4%) to London’s FTSE 100 (-1.4%). In fact, Wall Street recorded its worst day since 2020 as the S&P 500, which tracks 500 leading companies in the US, closed 4.9% lower.

On 4 April, Beijing retaliated and announced 34% tariffs on the US.

As the market continued to fall, it didn’t stop there, with both the US and China increasing their tariffs several times. By 11 April, China’s tariff had reached 125% and the US’s was 145%.

Amid this tit-for-tat trade war, Trump announced a 90-day pause on reciprocal tariffs for most countries, which led to markets rallying.

Despite the uncertainty experienced throughout April, the market began to settle towards the end of the month. On 24 April, the FTSE 100 closed 0.65% higher than it opened and was back to the level it was on 3 April before the tariff volatility. It was a similarly positive day for the main indices in Germany and France.

UK

Headline data was mixed for the UK in April.

Figures from the Office for National Statistics show the economy unexpectedly grew by 0.5% in February. While this will certainly be welcome news for chancellor Rachel Reeves, experts predict a downturn in March due to the tariffs.

Inflation also fell in line with expectations to 2.6% in the 12 months to March 2025, compared to 2.8% a month earlier. The Bank of England hinted it could cut the base interest rate at the next Monetary Policy Committee meeting, and did so in May 2025.

However, readings from S&P Global’s Purchasing Managers Index (PMI), which provides an insight into the health of businesses, aren’t optimistic.

The PMI indicated manufacturing production fell at a faster pace in March as new orders declined at the sharpest rate in 19 months.

In addition, the private sector went into decline for the first time since October 2023 due to exports falling at the fastest pace in almost five years.

Europe

Eurostat data shows inflation was down across the eurozone to 2.2% in the 12 months to March. There was a significant variance between countries, from France (0.9%) to Romania (5.1%).

The figures paved the way for the European Central Bank to make its seventh cut to interest rates in the last 12 months. The main interest rate fell from 2.5% to 2.25%.

PMI data was more positive for the eurozone than the UK.

Factory output increased for the third consecutive month and crossed the threshold that indicates growth for the first time in two years. This boost is linked to orders rising as businesses tried to beat incoming tariffs.

Perhaps unsurprisingly given market volatility, a survey from the ZEW Economic Research Institute found German investor morale plunged to the lowest level since the start of the war in Ukraine. The president of the institute pointed to the “erratic change in US trade policy” as a reason.

US

There could be difficult months ahead for the US. The International Monetary Fund increased the probability of a US recession occurring in 2025 from 25% to 37%.

Tariffs affected more than the markets too. Uncertainty around trade policy led to factory production stalling, according to S&P Global’s PMI. However, at 50.2, the reading remained just above the 50 mark that indicates growth.

Similarly, the PMI showed US business activity fell to a 16-month low.

Some of the largest businesses in the US have suffered a setback due to the tariffs.

On 3 April, Apple shares were down by 9%, wiping $300 billion (£225 billion) from the company’s value. The business relies on imports from Asia and is likely to face higher costs as a result.

Tesla’s quarterly sales also indicated challenges as they slumped 13% in the first three months of the year. The fall was linked to strong competition from rivals and owner Elon Musk’s involvement with Trump’s presidential campaign.

Asia

Exports from China climbed by 12.4% year-on-year in March – a five-month high. The jump was caused by factories rushing to get shipments out before tariffs took effect.

There was a blow to China when Fitch downgraded its credit rating from A+ to A. The organisation said the decision was made before tariffs were considered and is due to China’s rising debt and deteriorating public finances.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.