The New Domino Effect: Tariffs, Inflation, Fed Moves, And De-Dollarization

INSIGHT WEEKLY: April 27, 2025

📩 Images not loading? Click “Download external images” or read the full magazine online via the link above.

⏳ 5 minutes reading time. And to refer to during the week.

Stay ahead without the overload.

500+ professionals have subscribed to this magazine.

🌐 Markets Overview

📈 Markets This Week: Bracing for the Next Move?

With the year nearly one-third complete, US markets remain under significant pressure.

Tariffs loom large over the markets, already setting off a broader chain of effects across markets and the economy (see Causation Chain below).

Given the scale of the declines, a major turnaround will be needed for markets to post a positive return by year-end.

What could set the stage for a sustained recovery over the next eight months?

This week

The markets improved in the week due to reduced concerns about tariffs. As expected, there is increasing recognition that agreements will be more mutually beneficial than engaging in a trade war.

Is this the start of the recovery?

Rotation:

The decline in US markets YTD has created some rotation into Europe (STOXX 50 is up 5%) and into gold, which is up 27% YTD (about the same as all of 2024).

If US markets recover, the rotation may reverse.

Or are investors going to continue diversifying and reducing their US exposure?

Tech stocks

Intel is shaping up to be a turnaround story.

The recent tariffs have unexpectedly boosted demand for its older-generation chips, as PC and server makers look for more cost-effective alternatives.

This week, Intel announced plans to cut $500 million in costs next year and an additional $1 billion in 2026 by streamlining operations and improving efficiency.

Will we see the return of the “Intel Inside” logo placement on PCs?

The other stocks are in correction territory after strong gains in 2024.

AMD continues its decline (-20% 2025 YTD, and -18% in 2024), mainly due to its chips not finding enough favor with its customers, plus the macro effects of tariffs and reduced demand for tech stocks.

🇺🇸 Understanding the causal chain of tariffs

1. Geopolitical Risks → Tariffs → Rising Costs → Inflation

Geopolitical risks, such as trade wars and tariffs, are powerful drivers of global economic shifts. The cost of imported goods rises, leading to cost-push inflation.

Companies are forced to pass these higher costs onto consumers, causing an increase in prices across various sectors, which increases inflation in the economy.

2. Inflation → Higher Interest Rates (Fed Policy) → Slowing Growth

To combat inflation, the Federal Reserve often raises interest rates, making borrowing more expensive. While this helps cool down inflation, it also slows economic growth by reducing consumer spending and business investments. Higher borrowing costs hinder expansion, which impacts corporate earnings.

As growth slows and profits are squeezed, the economy faces a potential downturn, leading to slower job growth and weaker demand across many sectors.

3. Slowing Growth → Corporate Earnings Pressure → Market Volatility

When economic growth slows, corporate earnings typically suffer, due to rising costs or a decline in consumer demand. As earnings miss expectations, market volatility increases. In these times, even well-performing companies can experience significant share price drops, leading to broader market declines.

4. Market Volatility → Investor Sentiment → Fed Policy

When markets become volatile, investor sentiment weakens, increasing risk aversion and raising concerns about economic stability.

As confidence deteriorates, the Federal Reserve often faces pressure to adjust its policy stance, either by reinforcing its restrictive posture if inflation risks persist (increase interest rates) or by softening its outlook to support market stability and growth (reduce interest rates).

5. Fed Policy → De-Dollarization → Currency Shifts and Trade Changes

Changes in Federal Reserve policy, particularly around interest rates, continue to shape the global role of the U.S. dollar.

When the Fed maintains a restrictive stance and the dollar strengthens, other countries seek to limit their exposure to dollar dominance.

Conversely, if the Fed eases and the dollar weakens, concerns about long-term dollar stability can accelerate moves away from the dollar.

De-dollarization is already underway, as nations diversify their reserves and trade settlements into alternative currencies such as the euro, yuan, and regional options.

These shifts are gradually altering global trade flows, capital movements, and the structure of the international financial system.

Tariffs are likely to trigger a broader chain of effects across inflation, monetary policy, currency flows, and the structure of global trade itself.

🧭 Macro Watch: This Week’s Economic Developments

Here’s a quick roundup of this week’s key economic developments across major economies.

🌍 Global Growth Revision: IMF Lowers 2025 and 2026 Outlook

The global economic outlook deteriorated further this week following the International Monetary Fund’s (IMF) April 22 release of its updated World Economic Outlook.

• 2025 Global GDP growth for is now projected at 2.8 % for 2025, down from 3.3 percent forecast earlier this year.

• 2026 global growth is also revised lower to 3.0 %, compared to the prior estimate of 3.3 %.

• The IMF cited persistent trade tensions, a slowdown in investment, and mounting policy uncertainty as key drivers of the downgrade.

• Advanced economies, including the United States, are expected to grow at a subdued pace. The U.S. growth forecast for 2025 was cut to 1.8 %.

• China’s growth outlook for 2025 was also revised downward from 4.6% to 4.0 %, reflecting weaker external demand and the impact of new tariffs.

The IMF highlighted the consequences stemming from protectionist trade measures and supply chain disruptions.

🇺🇸 United States

• Durable goods orders rose by 9.2 percent in March, driven largely by a surge in aircraft orders. However, core capital goods orders, a proxy for business investment, remained flat.

• Existing home sales fell by 5.9 percent in March, marking the largest monthly drop since late 2022.

• Consumer sentiment, as measured by the University of Michigan’s final April reading, remained soft, with inflation expectations rising to 6.5 % over the next year up from the 5% in the same report for March.

🇪🇺 Eurozone

Despite some market optimism, underlying economic data remained weak. Germany downgraded its 2025 GDP forecast to zero growth, and the European Central Bank maintained a cautious tone, acknowledging increased downside risks to growth.

🇬🇧 United Kingdom

• Growth Risks: The IMF cut the UK’s 2025 GDP forecast growth to 1.1 %, down from 1.6 % in the January report, reflecting the impact of new U.S. tariffs on key exports such as steel, aluminium, and cars. Domestic pressures from higher energy costs and taxation are also weighing on the outlook. Business surveys show private sector contraction for the first time in 18 months.

• Inflation eased to 2.6 % in March from 2.8% in February, but remains above target. Markets anticipate a potential rate cut in May as domestic economic momentum weakens.

If you like this newsletter, please send this link to friends, family, and colleagues and post it on social media. https://insight-weekly.beehiiv.com/subscribe

🌐 Artificial Intelligence and Tech

This cover has been designed using assets from Freepik.com

 Google’s new A2A (Agent-to-Agent)aims to change how models work in isolation.

How?

By creating a set of standards and protocols that allow AI agents to communicate across platforms and vendors.

A chatbot trained by one company could seamlessly exchange information with a search algorithm or recommendation engine built by another.

This could open up possibilities for far more complex, multi-agent systems that can reason, negotiate, and act cooperatively in real-world environments.

Elon Musk’s xAI announced that Grok has gained visual perception capabilities, allowing it to “see” images in addition to processing text.

This enhancement makes Grok a true multimodal system, similar to the most advanced models emerging from Google DeepMind and OpenAI. Now, Grok can analyze a photograph, interpret visual information, and integrate that understanding into its text-based interactions. The implications are enormous: customer service bots that can assess documents, AI tutors that can interpret diagrams, or personal assistants that can scan menus and schedules visually as well as verbally.

xAI Holdings is raising between $15 billion and $20 billion in a private funding round. This deal would become the second-largest in history, trailing only OpenAI’s $40 billion raise earlier this year.

The funding, if completed, would give xAI the firepower to dramatically scale up its operations, from building larger training clusters to expanding its data partnerships and engineering teams. And to pay down debt - currently at $12 billion.

Get your free guide to AI

🌐 Crypto Corner

Top 10 cryptos:

Bitcoin (BTC):

Bitcoin gained 10% in the week, reaching around $93,000, making its year-to-date performance effectively flat.

As stock markets recovered this week, digital assets recovered too.

Solana (SOL):

Solana has declined nearly 20% year-to-date, giving back gains from late 2024.

Despite strength in DeFi and NFT activity on its network, recurring concerns over network reliability and broader profit-taking have weighed on sentiment.

Ethereum (ETH):

Ethereum is down over 47% year-to-date, underperforming other major assets.

Challenges from competing Layer 2 scaling solutions and subdued DeFi and NFT activity have continued to pressure the Ethereum ecosystem.

XRP (XRP):

XRP has gained approximately 5% year-to-date, making it the top performer among major cryptocurrencies so far in 2025.

Investor interest in cross-border payment infrastructure remains resilient, even as broader altcoin sentiment softens.

Cardano (ADA):

Cardano has fallen 15.6% year-to-date. Despite steady development efforts, Cardano has struggled to regain market share against newer, faster blockchain platforms in DeFi and NFT sectors.

Polkadot (DOT):

Polkadot is down about 35.7% year-to-date.

The ecosystem has seen limited traction for its parachain projects relative to competing interoperability and modular blockchain solutions.

Binance Coin (BNB):

Binance Coin has declined around 14.3% year-to-date.

Increased regulatory scrutiny of centralized exchanges globally has dampened BNB’s trading volumes and broader token utility narratives.

See the previous spotlight on Bitcoin halving

SPOTLIGHTS

Links to earlier spotlights :

US Reserves

Residential property ;

Japan ;

India - an emerging economic power ;

Recession ;

AI chips ;

Bitcoin halving ;

US National Debt ;

Gold ;

Nvidia ;

The $84 trillion wealth transfer ;

Crowdstrike issue