Trump’s Tariff Announcements

No cause for panic, just market shifts.

The long-anticipated and widely feared 3 April ‘Liberation Day’ tariff announcements have been released, providing the market with a first  look at new United States (US) trade policy under the Trump administration. Some areas of uncertainty remain, as well as how other countries will respond to the announcements.

The administration is clearly motivated to move manufacturing back to the US at the expense of key trading partners. This is likely to cause ongoing friction, leading to trade negotiations and companies examining supply chains.

President Trump’s aim is to rebalance global trade. However, this reality may be tempered by other factors, including political pressure resulting from an unpopular policy stance and the likelihood of economic pain. Trump may look to ‘deal’ his way out of his existing maximalist position.

There is no cause for panic. While we expect that in the short-term, markets will remain volatile, we are confident that active, well-diversified portfolios will perform well over the medium- to long-term.

Main take-aways:

• Confirmation of the flat 10% tariff is a blow to markets and the economy, but recent signalling showed this was expected and priced in. Tariffs will be implemented on 5 April 2025, and we expect them to remain in place for the foreseeable future.
• The ‘reciprocal tariffs’ were more aggressive than market expectations, with very high rates proposed and threats of escalation if countries retaliate. Rates of upwards of 20% imposed on countries including China (+34%), EU (+20%), and Japan (+24%) are material and a cause of uncertainty. These will be implemented on 9 April 2025.
• There is a likelihood that many of the tariff rates applied to nations will be the subject of ongoing negotiations, leaving the possibility that some may be reduced in the coming months. Tariff rates appear to have been determined by the size of a country’s trade surplus with the US.
• Clearly, protectionist policies are winning out within the Trump White House. We foresee tariffs remaining high and being a drag on global growth. US consumers will be impacted the most and are expected to tighten their belts in the coming months.
• Australia has had the minimum 10% tariff rate applied, which will have a very limited impact on the economy. However, we expect a greater indirect impact from other trading partners such as China and/or Japan.

What are the next steps for investors?

• Holding assets that provide diversification benefits, such as fixed income securities, infrastructure or gold, provide protection to portfolios in circumstances such as this, when fear and uncertainty impact the market.
• We will stay alert for opportunities to buy attractive investments, which often become mispriced during volatile periods as markets become fearful.

Our team is continuing to closely monitor the health of the economy to understand how consumers and businesses are faring, and how this may impact markets.

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Information contained in this document is considered to be true and correct at time of publication. In addition, the information provided is general information only, and does not take into account any individuals’ objectives, financial situation and needs. Before acting on any information contained herein, you should consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.