US president makes U-turn

US president makes U-turn

President Trump's surprising announcement that he would reduce tariffs on almost all countries – except China – to 10% for a period of 90 days at least caused euphoria on the stock markets. In fact, the lower tariffs for the time being justify a higher valuation of risky asset classes than the tariff level that was announced a week earlier and was in place for just one day. At the same time, however, the coming weeks and months will continue to be characterized by a high degree of uncertainty. The tariffs remain at a considerable level, the trade conflict with China continues to escalate and the moratorium on tariffs is only valid for 90 days. This means that the overall burden on the economy remains considerable.

The huge tariffs on China, the world's second largest economy, remain. In fact, Trump said they would be raised from 104% to 125% after China announced additional retaliatory tariffs on the United States on Wednesday. For all other countries that were subject to reciprocal tariffs on Wednesday, rates will be reduced to the general rate of 10%. Mexico and Canada will not be subject to the 10% tariffs, a White House official said. Goods from the two countries will continue to be taxed at 25% unless they fall under the USMCA agreement. In this case, no tariffs will be levied. A 10% tariff will be imposed on Canadian energy and fertilizer products. Sector-specific tariffs imposed by Trump remain in place. These include the 25% import tax on cars and car parts, as well as a further 25% tariff on all steel and aluminium imports. Planned tariffs on goods such as wood and pharmaceuticals are still in the works, while possible tariffs on semiconductors (25% or more worldwide) and copper (25% worldwide) remain a threat to date.

We therefore stand by the overall assessments of macroeconomic developments and the various asset classes in the update of our Global Strategy published yesterday. While valuations of risky assets should adjust and rise in the short term, the outlook beyond that remains characterized by uncertainty. The latest U-turn by the US president does little to change our macroeconomic outlook. We had already assumed that the US tariffs would not be sustainable at the levels originally announced and expected a cut to 10% for the Eurozone, albeit after a quarter rather than a day. Even after the latest temporary reduction in US tariffs, the potential for surprises remains considerable, and not only on the political side. It is uncertain how consumers and companies will react to this environment. Investors' risk appetite should therefore remain muted, which should be reflected in the performance of the corresponding asset classes.

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