Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Trump’s tariff tsunami: the latest trade move rocks markets – how investors can navigate the storm
Jacob Falkencrone
Global Head of Investment Strategy
Key points:
- Tariff shock: Trump’s new tariffs, the highest in a century, triggered a sharp global market selloff and increased recession fears.
- Who is in the spotlight: Countries with large trade surpluses like China, Vietnam, and the EU face steep tariffs, potentially causing widespread economic disruption and retaliation.
- Stay calm: Investors should avoid panic, stick to long-term plans, diversify portfolios, and look for buying opportunities amid market volatility.
As tariffs reach the highest level in a century, President Trump’s bold move shakes global markets, leaving investors to weigh their next move.
In what President Donald Trump labelled a “Liberation Day” for the American economy, April 2, 2025, saw the unveiling of the broadest and most aggressive tariffs imposed by the United States in over 100 years. Markets around the globe reeled in response, with investors swiftly retreating to safety amid rising fears of an escalating global trade war.
But what exactly was announced, who will it impact, and crucially, what could investors do now?
What exactly did Trump announce – and why?
President Trump introduced two key measures:- A 10% universal baseline tariff imposed on nearly all goods imported into the US, starting April 5.
- Reciprocal tariffs for about 60 countries accused of maintaining large trade surpluses or unfair trading barriers against the US, kicking in from April 9. For instance, China will face a hefty additional 34% tariff, pushing its total levy above 50%, while Europe and Japan face 20% and 24%, respectively.
Trump argues these aggressive tariffs are essential to protect US industries from what he terms decades of being “ripped off” by trading partners. He has framed these tariffs as a fair exchange: "They do it to us, we do it to them."
Who will feel the pinch – and by how much?
Countries with significant trade surpluses with the US face steep hikes, with especially harsh penalties hitting Asia. Vietnam will now face a staggering 46% tariff rate, and Taiwan and Thailand 32% and 36%, respectively. The European Union is staring at a 20% tariff – a figure that sparked immediate concerns and warnings of retaliation.
Notably, Canada and Mexico escaped the reciprocal tariffs, retaining exemptions under USMCA rules, although existing levies remain on goods tied to issues like drug trafficking and immigration.
Market reaction: a day of shockwaves
Markets, caught off guard by the severity of Trump’s tariffs, reacted dramatically. US stock futures plummeted, with the likes of Apple, Amazon, and Nike declining more than 6% as fears intensified that disrupted global supply chains would hit corporate profits. Asian markets mirrored this uncertainty, with Japan's Topix index slumping 3.8%. European stock markets are painted in red as well.
Gold soared to a record high above USD 3,150 per ounce, reflecting investors' scramble for safe assets. Meanwhile, US treasury yields dropped sharply as bonds rallied – another clear indication of heightened investor caution.
Economic implications: short-term pain, long-term uncertainty
While Trump claims the move will invigorate US manufacturing, many economists warn of potential negative impacts on the economy. The tariff offensive marks a significant economic turning point. With the US now enforcing what amounts to the steepest trade barriers in a century, the risks are more than just theoretical—they are visible in real time, and they are mounting.The immediate concern is the US economy, where the average effective tariff rate is jumping nearly 19 percentage points. That’s a direct tax on consumption and corporate costs, especially for industries relying on imported materials. The result? Higher prices, tighter margins, weaker growth—and a heightened risk of recession. Economists warn that these tariffs could accelerate the arrival of stagflation, where inflation rises even as the economy stagnates or contracts
Globally, the picture is just as concerning. China could lose up to 2.4 percentage points of GDP growth, according to recent forecasts, and the ripple effects could hit Europe, Asia, and emerging markets hard. This isn’t just a US-centric problem—it’s a potential global slowdown in the making.
Is this the end or just the beginning?
Given the scale and boldness of Trump’s latest move, one might ask if there’s further room for escalation. Unfortunately, the answer is yes. The reciprocal tariffs are structured separately from the baseline tariff, suggesting the possibility that the additional tariffs might be negotiated down over time—or raised further if retaliation escalates into a full-scale trade war. This is clearly a fluid, developing story with potentially far-reaching economic consequences. The current tariffs may very well mark the beginning rather than the end of Trump’s aggressive trade policy moves.Amid the escalating tension, Treasury Secretary Scott Bessent offered a glimmer of stability, calling the new tariffs “the high end of the number” and urging US trade partners not to retaliate. “As long as you don’t retaliate, this is the ceiling,” Bessent said, signalling that the White House may be open to negotiations if others show restraint.
But that hope could be short-lived. The European Union has already hinted at countermeasures, with Commission President Ursula von der Leyen stating the EU “stands ready to act” if targeted unfairly. Given that Europe faces a 20% tariff on its exports to the US—hitting industries like cars, wine, and luxury goods—retaliation seems not only possible, but likely. If the EU, China, or others respond in kind, Bessent’s “ceiling” could crack—and turn into a floor for further escalation.
This looming threat of tit-for-tat tariffs clouds any potential path toward de-escalation. What began as a bold, if unilateral, attempt to “rebalance” trade could spiral into a multi-front conflict with no easy off-ramp.
Investor insights: navigating the uncertainty
As a retail investor, the immediate reaction might be to panic and consider fleeing to safe havens or cash. However, now is exactly the time for clear, calm, and rational decision-making. Here's how you might consider responding:
1. Stay calm and stick to your plan
While the volatility can feel unnerving, historically, sudden market downturns have eventually recovered. Avoid making emotional decisions—stick to your long-term investment strategy.
2. Diversify more than ever
If you haven’t already diversified, now is a perfect reminder to avoid putting all your eggs in one basket. Diversifying across industries, regions, and asset classes can help buffer your portfolio against trade policy shocks.
3. Seize opportunities wisely
Market volatility often creates buying opportunities. Quality companies with strong fundamentals might now be trading at attractive discounts due to broader panic selling.
4. Defensive sectors are your allies
Focus on industries less sensitive to global trade, such as healthcare, utilities, and consumer staples. These sectors often prove resilient in turbulent times.
5. Re-evaluate exposure to vulnerable Industries
Industries significantly reliant on global supply chains—such as automotive and tech—could feel sustained pressure. Consider carefully if these holdings align with your risk tolerance.
Investor takeaway
As dramatic as these announcements are, they should serve as a clear reminder to maintain discipline, diversify, and manage risk carefully. Times like these test investor resolve but also create opportunities for those who remain steady and strategic. Trump's tariffs might bring short-term disruption, but staying informed and keeping a clear, long-term perspective remains the best approach for any retail investor navigating this turbulent market environment.
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