Global Markets Overview: March 2025

The most important events of the last month have been government policy rather than economic-data related. This also helps to highlight why economic policy uncertainty – as measured by the number of news articles discussing it – has also jumped materially in recent months. Equity volatility has started to rise too, as this political, geopolitical, and policy uncertainty looks increasingly likely to persist for the next few months and through 2025.

It's important to emphasise that the impact of economic policy uncertainty on financial markets can be two-sided. That is, it can create new positive surprises and opportunities for financial assets as well as downside risks. Three of the big policy surprises we have been tracking over the last month have been:

• First, the new German coalition government leaders have already announced plans for a surprisingly big government spending package. If approved within the next week, it would materially boost German real GDP growth in 2025 and 2026, e.g., it could add between 0.2% to 0.5% to growth this year and more in 2026, relative to our expectations at the start of the year. This would be an important positive factor to help offset downside risks to German growth from likely U.S. tariffs.
• Second, on March 4, an additional 10% tariff on U.S. imports from China came into effect, bringing the total additional tariff rate for imports from China to 20%. This was in-line with our baseline forecast at the start of the year. However, macro uncertainty and associated market volatility linked to U.S. trade policy with Canada and Mexico has continued. 25% tariffs against many goods from Canada and Mexico – larger than our baseline expectations – were implemented but then rapidly postponed to April 2, having already had a month's suspension from February. We expect a wide-ranging set of U.S. tariffs on various industries and countries to be announced on April 2.
• Third, the Chinese government has set a 2025 growth target of around 5%, with a record 9.9% fiscal deficit to support this target, counter U.S. tariffs, and offset deflationary pressures. This is broadly in-line to a little above our expectations.

Video transcript

Global Markets Overview: March 2025

[MUSIC PLAYING]

TESSA MANN: Hi, everyone, and welcome to this month's Global Markets Overview. For our Global Markets Overview, which looks back at February 2025, we focused our chart on economic policy uncertainty and financial market volatility. One of the key data points this chart reveals is the surge in economic policy uncertainty. This increase is primarily driven by government policies rather than economic data. In other words, the actions and decisions of governments around the world have become the primary drivers of this uncertainty.

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Contact

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David Hoile

Global Head of Asset Research at WTW

David is the Global Head of Asset Research at WTW, responsible for economic and capital market research. He also is a member of the Investment Assumptions Committee, who help guide investment policy globally.

email Email phone +44 20 7170 2144

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