Trump's tariffs spook investors

What’s been happening

Last week, U.S. President Donald Trump announced the implementation of significant new tariffs aimed at addressing what he describes as “unfair” trade practices and reducing the U.S.’ national trade deficit. The key components of this tariff policy include:

• Baseline tariffs: A universal 10% tariff to be imposed on all imports into the U.S., effective from 5th April;

  
  

• Individualised reciprocal higher tariffs: Higher tariffs targeting specific countries or trading blocs considered to have particularly unfair trade practices, or those with which the U.S. has the largest trade deficits. For instance, imports from China will face a 34% tariff (bringing total levies on Chinese exports to the U.S. to over 60%), the European Union 20%, Japan 24%, and South Korea 25%. These country-specific tariffs are set to take effect on 9th April;

  
  

• 25% tariff on all imported automobiles, previously announced, effective from 2nd April.

The tariffs have been justified by the Trump administration by claiming they are a direct response to unfairness in global trading partnerships, with the individualised reciprocal higher tariffs calculated using a formula factoring in both the U.S.’ trade deficit with a country or trading bloc, and the amount it imports from that country or trading bloc.

Impact on the world

The impact has been 3-fold across the world:

1. Global leaders fight back

   
   

Major U.S. trading partners, including the world’s second largest economy China, have condemned the tariffs and are preparing retaliatory measures, with China announcing retaliatory tariffs of 34% on US imports effective from 10th April.

A range of market participants are concerned this signifies the start of a new global trade war, potentially leading to increased consumer prices and market volatility.

2. Concerns about economies

There are concerns that the tariffs could lead to stagflation (the symptoms of which include high inflation, slow or negative economic growth and rising unemployment).

They also while make it increasingly difficult to make longer term forecasts, given the possibility for the tariff backdrop to change quickly in response to the President’s assessment of foreign retaliatory measures.

3. Falls in global investment markets

   
   

As markets digested Trump’s tariff announcement, there has been heightened volatility globally, with major stock indices notching significant falls the day following the announcement.

Comments from U.S. Treasury Secretary Scott Bessent added further fuel to the fire over the weekend as he pushed back on the short-term market reaction to the tariffs, noting that Trump’s tariffs the White House would “hold the course”– source: NBC.

As major indices started trading following the weekend on Monday 7th April, the S&P opened down 4%, with leading UK and European indices falling a further 4-5%.

Holding the course

It is important to note that we have seen numerous market shocks over the last few decades, with markets historically robustly recovering from them over a sufficient timeframe.

For example, this week’s disruption is comparable to, but currently smaller in size than, the volatility experienced during the early stages of the Covid-19 pandemic in 2020, which saw equity market falls of over 10% in a single day.

Market ups and downs are part of being an investor. While there are steps we can take to reduce the size of these ups and downs, avoiding it is near impossible.

What is controllable is the actions (or more importantly, inaction), taken in response to market swings.

We encourage you to focus on the long term plan, continue to believe in the relative efficiency of investment markets, and continue to remain invested with the ups and downs in the value of your portfolio.

Your investment portfolio

If you have a portfolio constructed by MUVADO, or follow MUVADO’s evidence based investment philosophy, you should have confidence in the following:

• Diversification

  • Your assets are spread globally, across thousands of different securities. When compared to more concentrated portfolios which might actively seek to trade or time investments in small subsectors of the market, which can then more easily get caught out as the global situation develops and events transpire in ways different to that expected.

• Minimum volatility factor

  • Your portfolio is weighted towards securities with low volatility – smaller fluctuations in value are expected from these assets comparted to the broader market.

• Fixed income

  • Defensive assets used in the portfolios are truly defensive. Short term, high credit quality. In times of equity market distress, these protect the overall value of portfolios.

• Zooming out

  • When looking at returns over the past 12 months, our most recommended 100% growth (highest risk) portfolio is -1.3% and the 60% growth, 40% defensive portfolio is +1.5% to 4th April 2025.

    
    

Over the long term, investment returns are still strong since 2009 and in line with expected above inflation returns.

Conclusion

Investment markets will continue to face challenges - wars, pandemics, global leaders to name a few.

Over the long term, being an investor is the best way to build wealth to help you spend more time doing what’s important to you. Your behaviour will shape your experience.

Stay the course and let us know if we can support you in any way.

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Risk warnings

Source for index performance data: Morningstar Direct, shown in local currency terms, extracted 07/04/25

Source for ebi portfolio data: ebi, shown in GBP terms, extracted 07/04/25

The information we publish has been obtained from or is based on sources that we believe to be accurate and complete. Where the information consists of pricing or performance data, the data contained therein has been obtained from company reports, financial reporting services, periodicals, and other sources believed reliable. Although reasonable care has been taken, we cannot guarantee the accuracy or completeness of any information we publish. Any opinions that we publish may be wrong and may change at any time. You should always carry out your own independent verification of facts and data before making any investment decisions.

Investments carry risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Risk warnings

Investments carry risks. the value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested.