20 May 2025
Fund managers sour on the US as tariffs expected to be partially introduced, according to global fund manager survey
- Fund groups overwhelming expect reciprocal tariffs to be partially reintroduced, with none expecting the same tariffs returning
- Trade war expansion is likely with managers earmarking the EU as likely to retaliate
- Tariff uncertainty leads investors to downgrade US economic growth and investment returns for 2025
Fund managers are preparing for Donald Trump’s ‘reciprocal tariffs’ to be partially reintroduced when the 90 day pause expires on 8th July, according to Quilter’s latest Investor Trends Survey.
Four in five (80%) of respondents said they think tariffs will be partially reintroduced, with 13% expecting them to be largely brought back. By contrast, no one surveyed expected them to be brought back in the same shape as they were first introduced, while just 7% thought they would be dropped completely.
Asset managers are also in agreement of where Trump’s trade war is likely to spill over. Three-quarters (74%) believed it was somewhat likely or highly likely that the EU would retaliate, with one respondent commenting that they now expect the EU to further distance themselves from the US. On the flipside, there was nearly unanimous agreement (93%) that the UK would not retaliate. This has rung true with the UK the first to strike a deal with Trump – although the contents of the deal do not amount to a full negotiation which can take years.
All of this negative sentiment is weighing on investor expectations for the US economy. One third of those surveyed believe that the US will deliver less than 1% of real GDP growth in 2025, indicating the US is susceptible to a recession this year. UK and eurozone growth forecasts have also dipped slightly, but not to the same extent.
Fund groups are also expecting this to translate into poorer returns for investors with exposure to the US. At the end of 2024, and following the election of Donald Trump, survey participants were asked which region they believed would offer the best and worst index returns. At that time, fund groups overwhelmingly expected the US to be the best performer, with the EU predicted to be the worst
However, fast forward just six months and the script has been ripped up and rewritten. In the latest survey, the US is expected to have the worst returns, as voted for by 53% of respondents. Meanwhile, the EU led the way in expectations, with 44% saying it will have the best returns.
The survey, which was sent to 21 of the leading fund management institutions representing £22 trillion of assets, is carried out on a quarterly basis and covers forecasts for macroeconomic data and timely indicators.
Lindsay James, investment strategist at Quilter, said: “Following a trade deal with the UK and the US and China relenting in their brinkmanship, the question on investor lips right now is ‘what happens after the 90-day pause on Trump’s reciprocal tariffs expires?’. President Trump has clearly been prepared, or forced, to listen to markets, and fund groups are expecting this will translate into a better programme of tariffs compared to 2nd April. But he also will not want a repeat of his backtracking. As ever with the current US administration, the only certainty is uncertainty, and that in itself is not good for markets.
“It is not surprising, therefore, to see investor expectations for US equity returns and economic growth to be downgraded. White House polices have been pinpointed by fund groups as the cause for sentiment in the US to swing so dramatically in a negative direction. Whilst many have sought to tread carefully to avoid overt criticism of the recent policies, the investment community is in widespread agreement that the current approach is damaging on many fronts.
“Europe looks like it will continue to be the main beneficiary over the course of the year, despite strong performance already being driven by the shift in attitude to defence spending. US equities may have performed well in recent weeks, but this survey highlights that Europe stands to be the winner of the cautious outlook ahead.”
