Volatility and the US Tariff Announcements
We live in interesting times.
Last week’s US tariff announcements were much larger than we or the markets had expected. With the US administration seemingly unperturbed by market volatility, the key question is how and when the economic data might prompt a shift towards a more moderate agenda and when does it become an investing opportunity rather than a volatile mess.
A complete picture on how different countries will retaliate to Presidents Trump’s tariff directive has not emerged yet. Retaliation could be merely symbolic, in an attempt to seal a deal, or it could be aggressive. We already see different approaches emerging. China, a significant US trading partner, has hit back with a hefty 34% import duty on US goods. At this stage uncertainty remains extremely high.
Markets, if anything, dislike uncertainty. Periods of market decline often pave the way for eventual recovery and, in some cases, significant growth.
While no guarantee exists, maintaining a diversified portfolio and focusing on long-term goals can help cushion short-term shocks. Experienced investors understand that attempts to ‘time the market’ rarely succeed.
We always recommend a consistent, well-planned financial strategy tailored to your personal objectives remains the most reliable path forward. As a company, we will continue to monitor events and work closely with our investment partners.
Below is an extract from an article from Rathbones which gives an insight into the thoughts of one of leading fund managers in response to recent events.
Will mercurial Trump reverse the tariffs?
“It’s a dictum that Trump tends to use the stock market as a gauge of presidential performance. Well, he has in the past. If that still holds, a sustained drop in stock markets may force him to reverse course – especially if opinion polls and allies start to slide as well.
It seems hard to see Trump backing away from the tariffs and surviving without losing all credibility. Although, we concede that Trump’s ability to turn on a dime and secure enough leverage or profile to appear the winner is endlessly underestimated. Trump has made them such a central part of his platform and has been such a central figure in creating them that it will be hard for him to call them the bad ideas and poor implementation of lackeys. He could still try!
Treasury Secretary Scott Bessent has looked particularly green in interviews given since the announcements. He’s a difficult fall guy though, considering it’s pretty apparent that he wasn’t in the room when they were agreed on (there are reports that he was ejected from the discussions several times in the lead-up). The main champions of the tariff agenda appear to be senior counsellor Peter Navarro and Commerce Secretary Howard Lutnick. Both are steadfast in their support of the tariffs even as ‘First Buddy’ Elon Musk criticised the move – there are rumours that he will soon leave his position at the Department for Government Efficiency (DOGE), although he has denied this. We will have to see what happens.
But these fractures show the political pressure that will be piling up on the White House lawn. Republican lawmakers will be apoplectic. High-profile Texas Senator and long-time Trump ally Ted Cruz has already condemned the tariffs and warned of a Republican “bloodbath” at the midterm elections in November 2026 if the tariffs usher in recession. There are bipartisan moves in Congress to challenge the President’s tariffs and how he has implemented them. These are on strong ground, to be fair, although they will need a super-majority in both houses to pass it. The chance of that seems vanishingly small.
As we’ve already laid out, tariffs are a tax. Under the US constitution, the power of taxation lies exclusively with Congress, not with the President. So how can Trump unilaterally raise taxes like this, we hear you ask. Well, the constitution vests foreign policy in the hands of the President. Over time, tariffs have been used as a sort of sanction against foreign countries that invade others or do things the US doesn’t like, i.e. they’ve been thought of more as a tool of foreign policy rather than a tax. Presidents have also used tariffs to defend industries in times of crisis – using emergency powers to raise barriers to protect jobs. Congress has allowed both of these uses and effectively delegated this to the President in many pivotal moments of the past 50-odd years.
To find out more or to speak to one of our financial planners about any market changes, contact us on 01633 840000 or info@kymin.co.uk