Dutch semiconductor equipment maker ASML reported weaker-than-expected first-quarter earnings on Wednesday, falling short of analyst forecasts. Despite the setback, the company reaffirmed its full-year 2025 guidance, projecting annual revenue between €30 billion and €35 billion.

ASML, which holds a dominant position in the chipmaking industry with its advanced extreme ultraviolet (EUV) lithography systems, saw its net bookings drop sharply to €3.94 billion — a significant miss compared to analyst expectations of €4.89 billion and a 44% decline from the previous quarter.

Total net sales for Q1 reached €7.7 billion, slightly under the anticipated €7.8 billion and a notable fall from €9.3 billion in the final quarter of 2024. Net income also declined to €2.4 billion from €2.7 billion. However, the company’s gross margin improved to 54%, up from 51.7% in the prior quarter.

Looking ahead, ASML expects Q2 revenue between €7.2 billion and €7.7 billion, with gross margins ranging from 50% to 53%.

CEO Christophe Fouquet acknowledged the uncertain macroeconomic landscape and mounting geopolitical tensions as factors contributing to the company’s performance risk in the near term. “The recent tariff announcements have increased uncertainty in the macro environment, and the situation will remain dynamic for a while,” he said.

Fouquet also pointed to the growing influence of artificial intelligence as a significant market driver, but cautioned that it brings both opportunities and challenges. “AI has created a shift in market dynamics that benefits some customers more than others,” he noted, suggesting that this divergence adds volatility to ASML’s revenue forecasts.

This marks a more cautious tone compared to last year, when Fouquet projected robust annual growth of 8% to 14% through the end of the decade. ASML had previously aimed for revenue between €44 billion and €60 billion by 2030, alongside gross margins of 56% to 60%.

Trade tensions, particularly between the US and China, remain a major headwind. ASML outlined concerns about the potential fallout from proposed US semiconductor tariffs, including higher freight costs and possible retaliatory actions. The company’s share price has dropped 18% since mid-February, following comments by former US President Donald Trump on new semiconductor tariffs.

The situation was further compounded by the U.S. Department of Commerce’s recent decision to launch an investigation into semiconductor imports. Nvidia also issued a warning regarding potential business impacts from escalating US-China trade restrictions, developments that could influence investor sentiment towards ASML.

Despite the challenging environment, ASML continues to return capital to shareholders. The company announced a proposed dividend of €6.40 per ordinary share for 2024, up 4.9% from the previous year, and repurchased €2.7 billion in shares during Q1 under its ongoing three-year buyback program.

UK inflation slowed for the second consecutive month in March, bolstering expectations that the Bank of England (BoE) will move to cut interest rates at its next meeting in May.

Figures released by the Office for National Statistics (ONS) on Wednesday showed that consumer prices rose by 2.6% in the 12 months to March, down from 2.8% in February. The decline was sharper than analysts had forecast, with many predicting a more modest drop to 2.7%. Falling fuel prices were cited as a key factor in easing inflationary pressure.

Despite the encouraging data, inflation remains above the BoE’s 2% target, with economists warning that price pressures could increase again in April. Rising domestic energy bills and the potential impact of global trade tensions are among the risks that could reignite inflation in the months ahead.

Still, many analysts now believe the central bank has enough room to begin easing its main interest rate, currently at 4.50%, following multiple hikes over the past two years to curb inflation.

“An interest rate cut in May looks increasingly nailed on, and the path to more easing in the second half of the year is getting clearer,” said Luke Bartholomew, deputy chief economist at Aberdeen.

The slowdown in inflation reflects a broader global trend. Since the pandemic and subsequent geopolitical shocks, such as Russia’s invasion of Ukraine, inflation has declined from multidecade highs. Central banks around the world, including the U.S. Federal Reserve, have begun cautiously reducing rates — though few expect a return to the near-zero levels seen after the 2008 financial crisis.

However, concerns remain. Nick Saunders, CEO of Webull UK, warned that “inflation remains stubbornly above the 2% target,” pointing to strong wage growth and the risk of resurgent price pressures. “Traders are pricing in three or possibly four cuts by the end of the year, but stubborn inflation throws this into doubt,” he said.

Saunders also noted the uncertain impact of the escalating global tariff war led by U.S. President Donald Trump. While tariffs could slow global growth and depress prices — especially oil — they may also lead to new market dynamics, including the UK potentially benefiting from cheaper imports.

Danni Hewson, head of financial analysis at AJ Bell, echoed that sentiment. “At 2.6%, inflation is ahead of the Bank’s 2% target but it’s likely to be sufficiently low to give rate setters the green light to keep cutting the base rate,” she said, citing market odds of an 85% chance of a rate cut in May.

The BoE has already reduced its benchmark rate three times since last August, lowering it from a 16-year high of 5.25%. The focus now turns to how far and how fast the bank will ease further — with domestic factors like labour costs and employment levels set to play a key role in future decisions.

Former President Donald Trump hinted on Monday at a potential temporary exemption from tariffs on the auto industry, aimed at giving U.S. carmakers more time to realign their supply chains. The suggestion comes as part of a series of tariff adjustments and reversals that have fueled market volatility and raised economic concerns.

Speaking from the Oval Office, Trump said automakers need more time to shift production back to the United States from countries like Canada and Mexico. “They’re going to make them here, but they need a little bit of time,” Trump told reporters. “So I’m talking about things like that.”

The auto industry has been grappling with Trump’s 25% auto tariffs, announced on March 27 as “permanent.” However, the latest comments indicate a softening stance, potentially aimed at minimizing the economic impact of his trade policies ahead of ongoing negotiations with trade partners.

Matt Blunt, president of the American Automotive Policy Council, which represents Ford, General Motors, and Stellantis, welcomed Trump’s consideration. “There is increasing awareness that broad tariffs on parts could undermine our shared goal of building a thriving and growing American auto industry,” he said, noting that supply chain shifts take time.

Trump’s shifting tariff strategy has become a hallmark of his trade approach. Just last week, following a bond market sell-off and rising interest rates, Trump announced a 90-day reduction of broader tariffs to 10% to allow for negotiation windows. Simultaneously, tariffs on Chinese imports surged to 145%, before certain electronics were granted temporary relief at a reduced 20% rate.

“I don’t change my mind, but I’m flexible,” Trump remarked Monday, emphasizing his willingness to adjust course as needed.

This flexibility, however, has heightened market uncertainty. While the S&P 500 rose 0.8% on Monday, it remains down nearly 8% for the year. Interest rates on 10-year U.S. Treasury notes hovered at 4.4%. “The whiplash has been so great I might need a neck brace,” quipped Carl Tannenbaum, chief economist at Northern Trust, warning that the ongoing confusion could lead to lasting damage to consumer and business confidence.

Meanwhile, the European Union continues its efforts to reach a trade agreement. European Trade Commissioner Maroš Šefčovič said he held talks with U.S. officials and reiterated the EU’s commitment to a “0-for-0” industrial tariff deal and reducing non-tariff barriers.

Technology giant Apple also found itself caught in the tariff back-and-forth. Trump claimed he recently helped CEO Tim Cook navigate the trade tensions. Although Apple declined to comment, the company’s stock rose 2% Monday following the electronics exemption. Analysts say the relief may be short-lived, as uncertainty still looms over future tariff decisions.

Apple is reportedly considering shifting more of its production to India — a move it began during Trump’s first term — to mitigate risks from the ongoing trade war.

Meanwhile, China is countering U.S. pressure by deepening regional ties. President Xi Jinping met with Vietnam’s Communist Party leader To Lam on Monday, warning that trade wars yield no winners. Trump, however, accused the two countries of colluding to “screw the United States of America.”

As Trump’s tariff strategy evolves, industries and investors are left trying to navigate the shifting landscape of U.S. trade policy.