Trade War Tensions >>>
Markets have had a bumpy ride this week - and I wanted to share a quick update on what’s going on and what it means.
The Trade War Just Got Serious
There’s been a sharp escalation in trade tensions between the US and China. Trump hasn’t backed down from his “reciprocal tariffs” policy, and in response, China announced a 34% surcharge on all US imports.
In short: the trade war is back - and markets are taking notice.
Why It Matters
For decades, globalisation helped bring down prices by allowing developed countries to import goods from emerging markets. At the same time, it contributed to factory closures and job losses in places like the US and UK. That’s been a key rallying cry for protectionist politics.
Now, we’re seeing a real shift. Policymakers seem more willing to accept what they’re calling a “necessary detox” - slower growth, lower asset prices, and possibly higher inflation - in the name of long-term economic change.
Tariffs Are Just Another Word for Tax
Here’s something important to remember tariffs are paid by consumers, not the exporting country. These new tariffs are the highest the US has seen in over 100 years. According to JP Morgan, they represent the biggest tax rise since 1968.
Some commentators even suggest this could be a deliberate move to slow the economy and make future borrowing cheaper. In fact, markets are now pricing in as many as five rate cuts before the end of the year - with the first possibly coming as early as May.
Trump has made his move — now the balls in the Fed’s court.
What Are Markets Focused On?
Now, markets are much more worried about recession than inflation.
Stocks and commodities have come under pressure
Bonds, on the other hand, have done their job - providing a cushion against market stress
This is exactly why we diversify. Even when markets seem calm, we prepare portfolios to withstand the unexpected.
While we’re not calling for a recession, we’re ready to reduce equity risk further if the long-term picture changes -and we’re watching for opportunities where the market overreacts.