As you are likely aware, the financial markets have experienced significant volatility in recent days. This turmoil is largely due to US President Donald Trump’s announcement last Thursday regarding the imposition of tariffs ranging from 10% to 49% on all global trading partners of the US.
While we had anticipated some form of tariff announcement, the scale and breadth of the policy took most financial market participants by surprise. As a result, we have seen a notable market reaction.
What the Tariffs Could Mean for Markets
There are many unknowns at the moment and we are dealing with this as an unfolding situation more than a specific event i.e. whilst we know what the tariffs are from the US side, we don’t know how other nations will respond. Some, such as China, are retaliating with their own tariffs on the US and others like the UK and Australia are seeking to negotiate a better outcome. Unfortunately, we simply do not know how this will play out however, what we do know is that the investment environment has changed.
What’s Next?
While speculation abounds regarding the future trajectory, we find it useful to reflect on President Trump’s business approach, as outlined in his book The Art of the Deal. His strategy often involves starting with an aggressive stance and then negotiating toward a more favourable outcome. It’s possible that this tariff announcement is just the beginning of a broader negotiation process on a global scale.
Critics, particularly economists outside the White House, have highlighted that this policy appears flawed and indiscriminate. As time progresses, it is becoming evident that this approach will be resisted by other nations, and American consumers—who are most likely to bear the cost of these tariffs—could ultimately feel the impact.
In its current form, we do not believe the tariff policy can persist for very long, despite Trump’s emboldened rhetoric. There are a number of plausible paths from here: the policy could stymie growth and lead to higher inflation (stagflation); it could set off a global trade war and risk recession; or Trump may make a tactical retreat, declaring victory after successful negotiations with major trading partners.
Our Approach Moving Forward
The situation remains fluid, and we, like others, can only speculate on how it will evolve. We will continue to monitor developments closely and adapt our strategies as needed. Our focus remains on maintaining a vigilant, well-informed perspective to guide our investment approach in these uncertain times.
We appreciate your continued trust as we navigate this challenging environment together. Please feel free to reach out if you have any questions or concerns.
