4 March 2025
If you are covering the market reaction to Trump’s tariffs, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
"The overnight announcement of tariffs commencing on Mexico and Canada caught US markets by surprise and has prompted a sell-off in US financial markets as investors have been forced to adjust to yet more unexpected and economically illogical policy from the White House.
"With the recent one-month reprieve on these tariffs seen as a sign that they were purely designed to extract action on further strengthening of borders, their sudden implementation has been met with an immediate response and sharply escalates the risk of an all-out global trade war between America and the rest of the world. Canada now expects to retaliate with equivalent tariffs on a range of goods including food, with a plan to ramp this up after a 21-day consultation period. This comes alongside an additional 10% tariff on China, in succession to a multitude of earlier tariffs that have already served to significantly reduce trade between the two countries in recent years and seen China pivot to build a new and growing alliance in the global south. With Mexico the home of numerous US company manufacturing plants, building around 15% of US-destined cars for brands such as General Motors, Ford and Chrysler, there will be an economic blowback. No clear route to de-escalation been signalled, whilst Donald Trump has previously suggested that ultimately the only way to avoid tariffs will be to shift manufacturing to the US – a lengthy, cumbersome and disruptive process for businesses. Recent corporate surveys indicate the manufacturing sector is already seeing a weakening outlook as managers find ongoing uncertainty bad for business.
"Whether investors will continue to believe that Trump sees the stock market as a barometer of his success will be sorely tested. With a 4-year time horizon before the next election, short term weakness can no doubt be stomached by the White House. However, in effectively blackmailing companies to bring manufacturing onshore he is making is a dangerous and high stakes move, with retaliation and lower growth the clearest outcomes in a highly uncertain world."
