Trump's New Tariffs Spark Global Market and Economic Concerns

The Facts -

• Trump announced new tariffs, including 10% on imports, China at 34%.
• Markets fear recessions as tariffs increase risk and stagflation.
• Global experts suggest diversification and cautious investment strategies.

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The latest wave of tariffs introduced by US President Donald Trump on April 2 has sparked significant global reactions. Announced as part of a "Liberation Day" declaration, these tariffs come in two major parts and have added to the ongoing trade disputes during Trump's second term.

• A 10% baseline tariff on all imports, set to commence on April 5, with exemptions for Canada and Mexico due to prior tariff negotiations.
• "Discounted reciprocal tariffs" targeting numerous countries, including 34% on China, 24% on Japan, and 20% on the European Union, effective April 9. These tariffs are said to be a strategy to charge about half of what these nations levy on US products, according to Trump's announcement.

European Commission President Ursula von der Leyen indicated quick responses from the EU, stating "We are already finalizing the first package of countermeasures in response to tariffs on steel, and we are now preparing for further countermeasures to protect our interests and our businesses if negotiations fail." ³

Impact on Global Markets

Kristina Hooper, Chief Global Market Strategist

The tariffs could heighten the risk of a recession, as per Kristina Hooper. The ongoing tariffs may lead to increased market volatility and pressure on risk assets. Yet, there is some optimism due to the staggered tariff implementation, which suggests they might be part of a bargaining strategy and could prompt some countries to reduce their tariffs on US products.

Short-term impacts might include pressures on US stocks and those of countries with heightened tariffs, while the US dollar could weaken. Conversely, gold might see an increase in value due to geopolitical and economic uncertainties. European and Chinese equities may benefit if fiscal measures are deployed to enhance economic growth.

US Market Insights

Brian Levitt, Global Market Strategist

Expectations were high before "Liberation Day" that the tariffs might be lower or that markets would gain clarity. However, the reality was different, leaving unresolved uncertainties regarding potential retaliatory measures from affected countries. Tariffs, while debatable in their economic impact, ultimately incur costs that can slow the US economy and challenge the Federal Reserve's ability to respond to economic slowdowns.

Effects on Canadian Economy

Brian Tidd, Senior Portfolio Manager, Canadian Equity Income

The Canadian economy stands to be significantly impacted by US tariffs on exports like autos, steel, and lumber. While new trading relationships will take time to establish, the US remains a primary market for Canadian goods, particularly oil. The urgency for Canada to focus on investment, innovation, and broadening alliances is clear.

Policy Uncertainty in Equity Markets

Nick Kalivas, Head of Factor and Core Product Strategies, Invesco ETFs

Nick Kalivas highlights the policy uncertainty in the wake of the tariffs, suggesting a focus on defensive investment factors. The volatile environment could present opportunities to strengthen portfolios strategically.

European Economic Considerations

Oliver Collin, Co-Head of UK and European Equities

The US tariffs represent a noteworthy change for Europe, with potential GDP impacts. However, increased self-sufficiency and government investment plans suggest a brighter medium-term economic outlook, especially in Southern Europe.

Commodity Market Reactions

Kathy Kriskey, Head of Alternatives Product Strategy, ETFs & Indexed Strategies

Commodity markets are under pressure from the tariffs, affecting energy, metals, and agriculture. While crude oil and gold aren't directly impacted, their markets still feel the effects of global economic concerns. The risk of stagflation remains a consideration.

Emerging Markets Projections

Justin Leverenz, Chief Investment Officer, Developing Markets Equities

Emerging markets may see mixed impacts from the tariffs, with potential benefits if the US dollar weakens. China's potential for stimulus could enhance its market performance, offering opportunities for investors.

Emerging Markets Debt

Wim Vandenhoeck, Co-Head of Emerging Markets, Invesco Fixed Income

Despite the US's willingness to engage with Canada and Mexico separately from other countries, emerging markets face challenges due to the tariffs. The ASEAN region, in particular, might experience significant impacts, highlighting a need for domestic economic revitalization.

Municipal Bonds as Safe Havens

Tim Spitz, Head of Municipal Business Strategy & Development

Municipal bonds offer a refuge amid market volatility. Their ability to diversify and mitigate risks makes them attractive, especially during uncertain times.

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