How Trump’s tariffs could hit personal wealth

The scale and permanency of these tariffs were greater than the market had expected and have led to some volatility across a variety of asset classes. Most notably, equity markets have fallen, as investors grapple with the impacts on the global growth outlook.

Tariffs ranging from 10% - 50% were announced on the countries with which the US has the largest trade deficits. For all other countries, where specific tariffs were not designated, a 10% universal tariff was announced. There was also confirmation of a 25% tariff on all auto imports. These latest tariffs will be implemented on top of those already in place by the US administration. 

• Blanket tariffs - 10% (including for the UK)
• China - 54% (reciprocal tariffs of 34% on top of the 20% increase in tariffs announced earlier this year)
• EU - 20%
• Japan - 24%
• India - 26%
• Trump’s officials warned that industry specific tariffs are likely to be announced on pharmaceuticals, copper and lumber in the coming days. Aircraft imports may also be considered amongst these additional tariffs
• Aluminium, steel, and auto imports will still face the recently announced 25% tariffs

The desired purpose of these tariffs is to support a restoration of the US industrial base. The US administration has made a conscious effort to highlight the growing disconnect between US workers, often referred to as ‘left behind’ in the industrial sector, and those internationally that have benefitted from an increasingly interconnected global trading system. They have also been clear that stock market action will not limit their policy decisions.

The most significant market moves today were in companies whose supply chains are most dependent on overseas manufacturing. Apple, which makes the majority of its US-sold devices in China, experienced significant price volatility despite a multi-year effort to insulate itself from trade wars.

While markets are trying to unpick the economic impacts of this latest policy announcement, two key areas are dominating the conversation. Firstly, investors are keen to understand how these tariffs will impact the underlying growth prospects of the US economy. The data is already showing uncertainty, which has resulted in many companies holding back on spending and hiring plans.

Only time will tell the extent to which firms shift from stabilisation to a reduction in their workforce, in a bid to protect margins. Secondly, the inflationary pressures of these tariffs present a challenge for the Federal Reserve. The US was already facing a difficult backdrop of higher than desired inflation alongside growth concerns and this latest announcement has made the central bank’s target of 2% inflation even harder to achieve in the near-to-medium term. 

Whenever change of this nature grips markets, it is imperative that we look through the initial ‘noise’ and position portfolios to navigate this volatility for longer-term returns. Regardless of whether investments are in pensions, ISAs, or other accounts, it's crucial to stay calm. Time and again, we observe that while economic shocks impact equity or bond markets in the short term, they tend to recover in the medium to long term. All investing does carry some risk though, as markets go up and down over time.

It can be tempting to sell or switch to ‘safer’ assets when your portfolio declines but this isn’t always the best strategy. During uncertain times, it's usually better to avoid making impulsive decisions, and instead, speak to a professional adviser about your options and the potential long-term implications for your money. 

At Evelyn Partners, we believe in the power of combined wealth management, especially during uncertain periods in politics and the markets. Our financial planners and investment managers collaborate to create a comprehensive strategy tailored to your needs.

Your financial planner structures your assets and crafts a personalised financial plan, while your investment manager builds a bespoke portfolio. Together, they ensure your portfolio aligns with your risk tolerance and financial goals in a tax-efficient manner. During periods of change, they swiftly make necessary adjustments and seize limited-time opportunities.

If you want to know more about the potential impact of the tariffs on your investments and personal wealth, speak to your usual Evelyn Partners contact or book an appointment online.