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Investing.com - U.S. President Donald Trump’s Tuesday deadline for postponed tariffs on Mexico and Canada -- as well as extra levies on China -- is set to be a major focus for financial markets this week. Meanwhile, factory activity data and a key payrolls report could provide a glimpse into the state of the U.S. economy. Bitcoin will also be under the spotlight, particularly after the world’s most popular cryptocurrency jumped on Trump’s announcement over the weekend that he will include five digital assets in a strategic reserve.
1. Trump’s tariff deadline ahead this week
Investors will likely be keeping close tabs on Washington this week, with the White House set to impose previously delayed tariffs on Mexico and Canada.
Over the weekend, Commerce Secretary Howard Lutnick told Fox News that that the levies, which were postponed by a month in February after Trump secured guarantees around beefed up border security from its northern and southern neighbors, will come into effect on Tuesday.
But Lutnick noted that the situation around the duties remains "fluid," although he added that Trump will have the ultimate decision on the proposed 25% level on all items incoming from Mexico and non-energy imports from Canada.
"There are going to be tariffs on Tuesday on Mexico and Canada. Exactly what they are, we’re going to leave that for the president and his team to negotiate," Lutnick said.
Last week, uncertainty surrounded the timing of the tariffs after Trump floated a possible April 2 deadline. However, he later reiterated the Tuesday deadline and said he would slap an additional 10% trade tax on China after placing a similarly-sized surcharge on imports from the country on February 4.
2. ISM PMI, payrolls data
On the economic calendar, traders will be monitoring a key reading of U.S. factory activity in February as well as a crucial monthly payrolls report later in the week.
The Institute for Supply Management’s purchasing managers’ index for last month is tipped to come in at 50.6, down from 50.9 in January. A mark above 50 indicates expansion.
The figure grew for the first time in more than two years in January, but the staying power of this uptick remained in doubt due in part to Trump’s tariff plans. Some economists have flagged that the levies could strengthen the dollar, making U.S.-made goods less attractive.
Meanwhile, the all-important nonfarm payrolls report is due out on Friday. The gauge of labor market health is expected to show that the U.S. economy added 156,000 roles in February, rising from 143,000 in the previous month.
Separate data in recent days have pointed to a slowdown in consumer spending and lingering inflationary pressures, presenting a complicated economic picture for Federal Reserve officials. At its last meeting in January, the Fed said it would take a wait-and-see approach to further potential interest rate cuts this year, citing a relatively robust jobs market and uncertainty around the impact of Trump’s trade and immigration proposals on inflation.
3. Bitcoin in focus
Trump is set to hold his first White House cryptocurrency conference on Friday, where he will likely offer fresh insight into his plans for the industry.
Bitcoin rose sharply on Monday, extending an overnight rebound, after Trump listed five cryptocurrencies he will include in a strategic reserve.
Trump on Sunday repeated his plans for a Crypto Strategic Reserve, stating that he had directed an executive group to proceed with the project. He claimed that Bitcoin, Ether, XRP, Solana, and Cardano will comprise the reserve.
“A U.S. Crypto Reserve will elevate this critical industry,” Trump said in a social media post.
Trump had last month signed an executive order to explore a regulatory framework on crypto, including the establishment of a strategic digital assets reserve. But the order had made no mention of Bitcoin, and had provided few details on what the regulatory framework would entail.
4. China’s National People’s Congress meeting
China’s National People’s Congress will hold its annual meeting this week, with investors listening for any updates on the country’s plans to roll out further measures to help stimulate its sputtering economy.
Beijing has been grappling with a range of headwinds facing the Chinese economy, including a weak real estate sector, sluggish domestic spending and intensifying international trade tensions.
Still, demand was solid from foreign clients in February, with new export business rising modestly for the first time since last November, Caixin’s purchasing managers’ index data showed on Monday.
Chinese manufacturing activity subsequently grew at a faster than expected pace last month, the survey found.
The figures come after official PMI released over the weekend showed the manufacturing sector expanded at a quicker rate than anticipated in February. Analysts at ING flagged that economists will be monitoring if there is a greater divergence between the Caixin and official data in the coming months, because the Caixin numbers tend to be more centered around smaller, export-oriented firms, especially in the private sector.
"This could be a valuable gauge of the impact new tariffs are having on the manufacturing sector," the ING analysts said in a note to clients.
5. ECB rate decision
The European Central Bank is widely expected to slash interest rates yet again on Thursday, although the outlook for reductions beyond the meeting remains deeply uncertain.
Markets are betting officials will lower the ECB’s key rate by 25 basis points to 2.50%. But, along with relatively tepid Eurozone activity, policymakers at the ECB face several developments that could impact the currency bloc’s economy.
Potential U.S. tariffs on European Union goods loom large, while coalition talks in the region’s traditional economic powerhouse, Germany, are ongoing.
Amidst all of this, recent actions and statements from the Trump administration regarding a possible Ukraine ceasefire have threatened to upend Europe’s defense strategy, especially its longstanding dependence on Washington to provide a security backstop. Analysts have begun to ponder if European leaders may need to increase defense spending, potentially shaking up the priorities of several government budgets.