Trump Tariffs and what is happening to my Investments?
We thought that it might be helpful to email you with an update on some of the reasons behind the current market conditions and to reassure you that we are here to answer any questions or concerns you may have about your investments and pensions. Short term volatility can sometimes result in a steep market increase/correction (as it did at the beginning of Covid in 2020) Stock markets do not like uncertainty and the recently announced US tariffs have caused a huge amount of it (other issues such as inflation and interest rates also have an impact).
Donald Trump’s tariffs have upset markets because they weren’t prepared for the huge changes he is proposing or that he would use a formula that is not actually based on the tariffs that other countries charge the USA for goods coming in to their country but rather on US trade deficits around the world (ie how much does US buy from other countries compared to how much they buy from US) – one example is Vietnam which has a population of about 99 million (US population is 342 million) and much lower wages – they cannot possibly ever buy the same volumes of products, yet D Trump wants to impose a tariff of 46% on them. Another example is the Heard & McDonald Islands in the Indian Ocean – which are occupied solely by Penguins and have received a tariff of 10%.
He’s intending to apply a 10% tariff on the UK (plus 25%) on cars, yet we don’t have a trade deficit anything like 10% with them.
Markets fell even further after China and EU announced that they intend to apply reciprocal tariffs to US. And as above, there are lots of other factors adding to the current stock market volatility
Trump has already mentioned his willingness to negotiate, and the unpopularity of additional price rises for US consumers should encourage him to do so. In his book, The Art of the Deal, he says “I always go in with a very low offer, and I always assume that the other side will negotiate. I believe that the other side will want to make a deal, and I’m willing to negotiate.”
It therefore seems likely that we’ll see a reduction in these tariff rates, which will benefit stock markets and therefore your investments and pensions. It’s natural to feel concerned during sharp market declines. But volatility itself isn’t new—it’s part of the market’s long-term rhythm. What often matters most is how investors respond to it.
Historically, markets have experienced many episodes of high volatility and large drawdowns, only to recover over time. Staying diversified, avoiding emotional decision-making, and maintaining perspective has often helped investors stay on track through turbulent periods.
Markets are in a highly emotional state right now. While no one can say exactly when the storm will pass, your investments and pensions are invested on the basis of the attitude to risk that we agreed – on a scale of 1-10, the vast majority of people are risk levels 4-6, and when you hear on the news about the FTSE and other Indices (made up of stocks and shares) dropping by a certain percentage in a day, not all of your money is invested in these – you also will have money in property, government bonds and even some in cash.