So now we know the extent of it. President Trump has unveiled his long-anticipated so-called, ‘reciprocal’ tariff plan, dubbing it ‘Liberation Day’ as part of his wider ‘America First’ strategy. The wide ranging move applies additional tariffs to all US imports, from this Saturday, starting at 10% for some countries (including the UK) and up to 50% for others, such as China. The tariffs target all nations exporting goods to the U.S. It’s heightened fears about the impact on the global economy and spooked global stockmarkets.
The threats of likely retaliatory measures and the very real prospect of a global trade war that could disrupt markets, destabilize economic growth, and fuel inflationary pressures in the U.S. – as well as elsewhere – dominate. The implications of these measures are clearly very stark and we thought it was interesting that the announcement was only made after markets closed yesterday.
Speaking at PMQs yesterday, UK Prime Minister Sir Keir Starmer, reassured that Britain is “prepared for all eventualities.” However, with Chancellor Rachel Reeves already navigating economic headwinds, these new trade barriers add further complexity to the UK’s financial landscape.
For wealth managers and discretionary fund managers (DFMs), understanding the potential market ramifications of these latest tariffs will be critical in managing risk and positioning portfolios effectively. Is the reality different from the market’s expectations? We all know that markets tend to anticipate major events -especially a potential supply shock like this one – and the ultimate reaction depends on whether expectations were under or over played. The uncertainty which has underpinned markets since Trump took office in January isn’t going away anytime soon. If anything, it’s gone up a gear as the
In this article, leading industry experts share their insights on what these tariffs mean for businesses, investors, and global asset allocation in the weeks and months ahead as follows:
Simon Edelsten, CIO of Goshawk Asset Management says: “It’s hard to tell just what the knock-on effects of ‘Liberation Day’ will be beyond depressing – for markets and people. The details are still vague; the maths behind it unfathomable.
On the face of it the UK has got off lightly, but cars made in the UK will probably be sold into Europe rather than the USA. The next largest UK export to the US is pharmaceuticals. No-one is sure from Trump’s ramble whether the tariffs cover all pharmaceuticals. A US citizen taking a drug made by, say, Glaxo, is unlikely to switch to a cheaper medication, so will just have to pay the higher price.
Countries facing much higher tariffs will look to sell goods once intended for the US to other markets, including the UK. While this can make things cheap for consumers here, it may also undermine the profitability of domestic manufacturers.
After hours, the US market reaction was negative and reflected reduced expectations of growth. It was as if investors thought the tariffs would be watered down more than this. The Magnificent Seven technology stocks all fell – suggesting investors are selling equities and buying bonds. Apple makes most iPhones in China. If these now receive a 34% tariff that’s a chunky price rise for US consumers. Expect to see American tourists looking confused when they see new iPhones substantially cheaper in a UK Apple Store than back home.
For UK investors, ‘tin hat’ stocks such as property shares and insurance companies have the resilience to cope with these changes. Economically sensitive sectors such as banks and commodity stocks may not cope so well.
After the Spring Statement many commentators noted how little ‘wriggle room’ the UK Chancellor has in her budget. The UK tariffs are lower which is good, also gilt yields have fallen – which makes UK debt interest lower, which is good but also reflects lower growth prospects which is bad! Overall, for businesses and for Chancellors and US consumers there is nothing good (or even coherent) about these tariffs.”
Matt Britzman, senior equity analyst, Hargreaves Lansdown says: “Trump’s bold attempt to reshape international trade has sent shockwaves through global markets. The effects of ‘Liberation Day’ are being felt far and wide, with Asian markets down overnight, European stocks under pressure in early trading, and US futures pointing to a big drop later today. With tariffs reaching levels unseen in over a century, the US is poised to rake in an additional $600bn in tariff revenue in an optimistic scenario, or put that another way, that’d be a $600bn added cost for businesses or consumers to stomach.
While economists scramble to predict the impact on inflation and global growth, businesses around the world are getting their first real look at what a tariff-heavy US trade policy means, and this may just be the beginning of a fresh round of tariff drama. Each country now faces the option of negotiating from this starting point, which, in theory, represents the worst-case scenario. A carrot has been dangled, but if countries opt for the stick, retaliation could mean things get worse before they get better. That doesn’t make it any easier for businesses to make clear-cut decisions about major investments in their supply chains, so we can expect volatility to stick around for the foreseeable future.
The UK, meanwhile, may seem to have fared better than some, but its deep ties to the global economy make a slowdown in growth almost unavoidable and the FTSE 100 has been caught up in the global market sell-off. The government is taking a pragmatic approach, hoping for a trade deal that could ease some of the tariff burden. However, with uncertainty looming large, where we go from here is hard to call and markets rarely respond well to uncertainty.
It’s hard to find many winners, but gold prices continued to rally as investors flocked to safer assets, reaching a fresh all-time high in the aftermath of Trump’s announcement, before pulling back a touch this morning. There’s a lot of debate about whether gold adds real value to a portfolio in the long run, but investors are clearly leaning in to take some shorter-term risk off the table.
Oil prices have sunk as markets adjust to the impact of sweeping tariffs, which are expected to weigh heavily on global growth. Adding to the sombre mood, US crude inventories unexpectedly surged last week, defying forecasts of a 2-million-barrel drawdown.”
Jochen Stanzl, Chief Market Analyst at CMC Markets says: “The 22,000 mark in the DAX has been breached, and the fears that many had anticipated are now materializing: the index may fall below this support level depending on the outcome of Donald Trump’s speech in April. Further declines are certainly possible. A recovery seems contingent on the European Union and the U.S. finding common ground and possibly achieving some diplomatic progress that currently appears unlikely. By the end of April, the DAX must regain the 22,200 points; otherwise, the previously attainable technical price target of over 26,000 points will drift further out of reach. A break of the upward trend in the DAX could happen, making a drop of over 1,700 points from the current level a looming possibility.
The hope that things would not be as dire as feared persisted during the U.S. President’s speech yesterday, but it evaporated when he held up a poster displaying the sheer magnitude of the tariffs. It became clear to everyone that Trump is serious about his stance. The risks of recession and the potential for a global trade war have surged dramatically. The implications of these tariffs on international trade dynamics are unclear, particularly regarding how the U.S. intends to negotiate new deals with all countries in such a short timeframe. One must truly question whether the U.S. is genuinely interested in negotiations at all.
What began as a notable gain in U.S. futures quickly turned into a significant loss. Such volatility and trading volumes observed yesterday in the U.S. after-hours market are rare. It appears that larger players, who typically only operate during regular trading hours, attempted to offload positions. This behavior undermines trust, particularly among the very investors that the U.S. President aims to attract for investment in the U.S. economy.”
Andy Draycott, Portfolio Manager at Chikara Investments says: “Trump’s tariffs offer an opportunity to accelerate the rate at which India picks up some of China’s manufacturing share. We expect an increase from India’s current 1% market share as companies shift at least some of their manufacturing capacity to sidestep Sino-US uncertainty.
“Additionally, Trump’s reciprocal tariffs on India could catalyse improved economic relations through further Indian concessions as officials have been debating lower duties for a variety of goods to offset the impact of tariffs.”
James Henderson, co-manager of the Lowland Investment Company and Law Debenture, says: “We are in new territory. The reason inflation has been so low since the 70s is because of globalisation, which has brought a lot of prosperity to much of the world. You cannot retreat from globalisation without feeling the negative impacts. But it is easy to overreact. Equity markets are shaken today, but with the threat of inflation rising again, equities have to be part of the investment mix. There will still be sectors for smart stockpickers that will be relatively unaffected. Domestic focused UK companies are on such low valuations that this will be just noise for many of them. The picture is not all bleak. It seldom is!”
David Roberts, Head of Fixed Income at Nedgroup Investments says: “The old saying “the enemy of my enemy is my friend”. Trump policy is uniting Europe. It is also uniting China with Japan and South Korea. The US is in danger of throwing away 50 years of economic advantage.”
“Bizarre. If I’d presented this at high school, I’d have been given a D. 10% – where did that come from, let’s see your workings child?”
“So, Trump claims the U.K. “charges” 10% on US goods. He retaliated with a 10% fee. In other words, 100% what we charge them. He claims China charges 80%, so his retaliation is 40%. Only HALF. The lesson? Charge America as much as you can because Trump “rewards” the bad and penalises the good.”
“What next for rates? trump policy will slow growth and raise inflation, especially in the US. Markets are pricing nearly 5 rate cuts before the mid-term elections. Will the Fed see the impending inflation spike as “transitory” and shift to focus on the growth and employment element of their mandate? Markets are betting they will. If they don’t, bonds AND equites look vulnerable – you wouldn’t want to be a Republican fighting to hold a seat in November 2026. “
David Coombs, Fund Manager, Rathbone Multi-Asset Portfolios says: “Well, at least we know… or do we?
Classic Trump ‘shock and awe’. What happens next? Governments around the world scramble for a response. Australia and UK call for calm heads, EU and Canada more combative.
This is clearly a negotiating tactic. Markets are taking fright as you would expect, with recession talk leading the word cloud. Sovereign bond yields lower, US Dollar lower and equities gaping down in the sectors most impacted.
Fortunately our positions in US, European, UK (long duration) and Australasian bonds are providing some protection this morning, plus our US Dollar hedges.
I believe it’s too early to be too aggressive in adding to equities on mass, but we have plenty of cash to take advantage of any outsized moves in high conviction names.
On balance, I think common sense will prevail and some concessions will be made to the US which will allow Trump to claim victory for the ‘rust belt’. However the next few weeks will be challenging, with risks and opportunities aplenty.”
Jacob Falkencrone, Global Head of Investment Strategy at investment platform Saxo wrote: “Markets, caught off guard by the severity of Trump’s tariffs, reacted dramatically. US stock futures plummeted, with the likes of Apple, Amazon, and Nike declining more than 6% as fears intensified that disrupted global supply chains would hit corporate profits. Asian markets mirrored this uncertainty, with Japan’s Topix index slumping 3.8%. European stock markets are painted in red as well.”
“Gold soared to a record high above USD 3,150 per ounce, reflecting investors’ scramble for safe assets. Meanwhile, US treasury yields dropped sharply as bonds rallied – another clear indication of heightened investor caution.”
“While Trump claims the move will invigorate US manufacturing, many economists warn of potential negative impacts on the economy. The tariff offensive marks a significant economic turning point. With the US now enforcing what amounts to the steepest trade barriers in a century, the risks are more than just theoretical—they are visible in real time, and they are mounting.”
“The immediate concern is the US economy, where the average effective tariff rate is jumping nearly 19 percentage points. That’s a direct tax on consumption and corporate costs, especially for industries relying on imported materials. The result? Higher prices, tighter margins, weaker growth—and a heightened risk of recession. Economists warn that these tariffs could accelerate the arrival of stagflation, where inflation rises even as the economy stagnates or contracts.”
“Globally, the picture is just as concerning. China could lose up to 2.4 percentage points of GDP growth, according to recent forecasts, and the ripple effects could hit Europe, Asia, and emerging markets hard. This isn’t just a US-centric problem—it’s a potential global slowdown in the making.”
Paul Diggle, Chief Economist, at Aberdeen said; “There is a meaningful risk that the announcements yesterday, as dramatic as they were, do not represent “peak tariffs”. We still think additional sector specific tariffs are coming, including on semiconductors, copper, lumber and pharmaceuticals.
Indeed, these products were mentioned in the executive order, specifying that the reciprocal tariff policy does not apply to them, therefore leaving open that specific rates will be coming soon. On the other hand, that does seem to mean that sector-specific tariffs and reciprocal tariffs aren’t additive.
Additionally, the Executive Order provides the President with the right to modify tariff rates in the event of retaliatory measures, meaning rates on some trade partners could be pushed higher still.
There is still scope for US tariffs to eventually settle at a lower level, and this is probably still a widespread expectation.
The 10% global baseline is likely a floor, but structuring the reciprocal tariff as an additional rate on top of that at least leaves some chance of it then coming down.
So far, the administration appears far more tolerant of market weakness than in Trump’s first term. Indeed, low bond yields and a weaker dollar may be actively helpful market moves give the administration’s preferences.
The net impact on the US economy will almost certainly be stagflationary, although the magnitudes of the price level increase and GDP hit are hard to pin down.
The shock to growth and inflation is sensitive to whether tariffs are perceived as temporary or permanent, the scope for firms to absorb price rises in their margins, currency moves, and how financial markets react, among other things.
A crude rule-of-thumb is that every 1 percentage point increase in the US weighted average tariff rate translates into a 0.1 percentage point rise in the price level and knocks 0.05-0.1 percent off GDP. This would suggest that the full increase in US tariffs yesterday and in recent weeks could add 2% to the price level and push GDP down by 1-2%.
There is a potential for some offsetting economic benefits if the roughly $0.6 trillion (~2% GDP) which could be raised by the tariffs finance tax cuts rather than deficit reduction. However, if the revenue is “used” in this way, it would make negotiating away the tariff increases in the future more difficult.
The Fed faces a difficult trade-off. Policy makers have previously talked about tariffs having only a “transitory” impact on US inflation, but given the recent sharp increase in inflation expectations it may be difficult for the Fed to look-through this impact.”
Oliver Blackbourne, Portfolio Manager on the Multi-Asset team at Janus Henderson Investors, said:
“Despite already increased expectations for a less positive outcome to Liberation Day, the reality was even worse. Tariffs were higher on key trading partners, with Asian export powerhouses seeing the most severe impact. In addition, there was a new baseline tariff of 10% applied to all countries and the “de minimis” exception that had applied to Chinese goods was removed. In a blow to those looking for negotiations to bring down the applied rates, the timeframes laid out for implementation are very short, leaving little room for specific deals to be carved out.
“While that perhaps brings greater transparency to part of the situation, markets will await the response from the larger economies around the world, and the potential retaliation from the US to this. With the potential revenue to be generated from tariffs featuring heavily, it is also far from clear that the US administration is going to strive for deals that might reduce the money raised from imports. Uncertainty over how the dust ultimately settles looks likely to hang around for some time yet, frustrating investors who crave clarity.
Even the US administration is willing to admit that tariffs are unlikely to be good for the economy in the near term. With recession probabilities already rising before Liberation Day and the applied rates being higher than expected, expect to see consensus expectations price in an even greater probability of a US economic contraction, as well as increased fears for elsewhere. Within the US, the fear is that inflation is forced higher as suppliers refuse to cut costs and retailers are forced to push up prices.
“A weaker dollar has not performed the shocker absorber function that many had assumed a few months ago. Incomes are already being squeezed once adjusting for inflation and the fear is that the tariffs act as a ”tax” that leads to a contraction in real consumer spending, the backbone of the US economy. Consumer confidence has already ebbed significantly and companies have shown signs of losing confidence. With many other major economies benefitting significantly from exports to the US, a slowdown in trade could be painful around the world.
“US equity markets have continued to take the brunt of investors angst, with the large cap growth NASDAQ 100 and domestically-sensitive small cap Russell 2000 seeing heavy losses overnight. European stocks have remained more resilient, perhaps due to the prior announcements of fiscal stimulus. However, there is a time horizon gap that investors need to be careful of between when the negative effects of tariffs may bite and when support from government spending might arrive.
“The case is similar in China where onshore, more domestically-focused stocks have held up well compared to other markets, although the government have already made it clear that they are ready to stimulate further if this situation was realised. As might be expected, government bond yields have fallen as investors fret about higher recession risk and lower interest rates. Surprisingly for some, the US dollar has slumped against the euro as it appears investors are worried about a US recession first and foremost.
“Such a broad negative policy catalyst for the global economy rightfully demands a reassessment of the general outlook. If the announced tariffs are implemented and remain at the levels laid out, the danger of the global economy slipping into contraction has certainly jumped higher. This is not to say that recessions are a certainty, only that the likelihood is now meaningfully higher. Markets have clearly taken note but are still far from pricing in the most negative scenarios, with valuations on many equities still elevated vs history. We can find some evidence that markets are oversold in places but deterioration in fundamentals could easily make these irrelevant.
“Similarly, government bond markets would likely need to see a further shift lower in yields to price in more dramatic responses from central banks to support employment levels. Investors will now look ahead to the US labour market report on Friday for signs of how economic momentum was coming into Liberation Day and then for any signs that deals are being struck to reduce the worst of the drag from tariffs. While risk assets may take some succour from solid payroll growth, it is important to recognise that this won’t fully reflect the rising uncertainty. Similarly, within markets, investors will want to keep an eye on lower-quality credit for signs that the shock is becoming more dangerous for financial conditions. The benefits of wide diversification are being seen and investors might be wise to continue to look for ways to spread their risk.“
William Marshall, Chief Investment Officer, Hymans Robertson Investment Services, says:
“Yesterday’s tariff announcements were on the higher end of analysts’ range of estimates. Economic growth is now expected to be lower as a result. While the US will feel it most acutely, the rest of the world, including the UK, will also feel the impact. The concerns over economic slowdown are now amplified, but a full recession is still not the base case. Higher inflation in the US is inevitable, bringing them closer to the dreaded stagflation, but this is likely to be a short-term one-off adjustment to price. The UK shouldn’t be significantly impacted but only time will tell here. In this lower growth environment, we will likely see bond yields supressed, and bond prices rise. We might also see this exacerbated further by investors – taking steps to protect themselves – rotating into these less risky assets, like government bonds.
“Looking to portfolios, the short-term impact on asset classes will be volatile. But bond holdings will likely have a significant role for many, helping to dampen losses from equities. Along with a diversified approach to accessing equity markets, for example, holding less in US and more in UK and other regions. Portfolios taking this approach would have added value, as equity regions outside the US have held-up considerably better over this recent period.”
