23 May 2025
If you are covering Donald Trump’s announcement of fresh tariffs being put on the European Union, please find below a comment from Lindsay James, investment strategist at Quilter:
“Any thoughts that Donald Trump’s tariff regime was to die down following deals with the UK and China, can safely be put to bed. Trump hitting the EU with 50% tariffs, and threatening Apple with its own level, highlight that he will do anything it takes to come to some level of a deal that allows him to claim victory of one sort or another.
“What is somewhat of a surprise is the fact that the EU will now face a considerably higher tariff rate than China, an almost unthinkable scenario just a matter of weeks ago. It is highlighting that much of this policy is designed to be punitive, rather than having any economic credibility to it. European markets will consequently suffer as a result, undoing some of the strong momentum we have seen in recent months. US businesses too will be unsure what the rules of engagement are too, meaning any planning simply becomes impossible to do.
“What this latest move threatens is a full-scale escalation of the global trade war. The EU has shown it is comfortable standing up to Donald Trump so far. Indeed, in our latest global fund manager survey, the vast majority of respondents thought it was likely the EU would retaliate in some shape or form. The 90-day pause was always somewhat of a red herring and unlikely to stand if Trump was not getting his way. We now know how far he is willing to go to put the pressure on.
“For markets, this just underscores what an uncertain and volatile time we live in. Economic policy is being communicated via social media, rather than official channels. Any goodwill built up from recent trade announcements has been burnished, and as such nerves will creep back into the market. For investors, it is a reminder that diversification will provide shelter during such a time and help mitigate the impact of some of this volatility. What happens next is anyone’s guess, but it is unlikely the EU simply rolls over following this latest development.”
