Diversification is the name of the game for investors in the wake of President Trump’s threats to impose a 50% tariff on EU imports, says Quilter.
The US President recently threatened to impose a 50% tariff on goods coming from the EU from 1 June. This was swiftly followed by a decision to delay the tariff until 9 July, as the two sides attempt to negotiate a trade deal.
While the outcome remains uncertain, what is clear is that any hopes that Trump’s tariff regime was going to die down following deals with the UK and China, are fast disappearing.
Lindsay James, investment strategist at Quilter, said: “Trump hitting the EU with 50% tariffs highlights 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.”
James said the notion that the EU will now face a considerably higher tariff rate than China has come as a surprise.
“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. US businesses 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. For markets, this just underscores what an uncertain and volatile time we live in.”
James said 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,” James added.
