We do no expect large, broad, and sustained US tariffs, but repeated threats of higher tariffs on key trading partners and a lack of policy visibility could weigh on business investment and hiring even if they are never imposed. More volatile markets require an increased focus on portfolio diversification and hedging approaches.
Investment view
We have cautioned that volatility is likely to be higher this year due to policy uncertainty and trade frictions, but we reiterate our view that the bull market is intact, and we expect US equities to end the year higher. Investors should ensure portfolio diversification and consider hedges to navigate volatility ahead.
In a nod to mounting growth and tariff concerns, President Trump on 9 March predicted “a period of transition” for the economy when asked about recession risks, while Treasury Secretary Bessent warned “there’s going to be a natural adjustment as we move away from public spending to private spending.”
US President Donald Trump is ordering the Commerce Department to launch an investigation into the national security harm posed by lumber imports, laying the legal groundwork for new tariffs he’s pledged. The investigation will examine whether exporters like Canada, Germany, and Brazil are dumping lumber into US markets at the expense of American economic prosperity and national security.
US President Donald Trump reiterated plans to levy tariffs on a range of products including cars, semiconductors, pharmaceuticals, and lumber “over the next month or sooner,” with 2 April a key date to watch after his cabinet is due to devise specific import taxes.
Did you know?
Mexico and Canada together account for about 30% of the US’s total trade, more than twice the share of direct trade with China (12%).- We believe that President Trump will be willing to seek “deals,” particularly if US economic activity is potentially at risk from failure to agree, and if counterparties show a willingness to offer concessions. The action on tariffs thus far shows how threats can be escalated only to be subsequently deescalated.
- In our base case, we expect tariffs on China increase to an average effective rate of 30%by the second half of 2025. We also expect select tariffs on Europe and some efforts to limit transshipments.
Are you a client?
