Back in April, I wrote an article about the impact of narrative on stock markets. While narrative still has a massive impact on the world in which we invest and makes life fairly volatile, the buzzword this last week seems to have been another Trump favourite: tariff.
The word tariff has appeared frequently in the news this month (this year, really) and is related to trade policy, particularly in the context of Donald Trump's "America First" trade policy. According to Trump, “Tariff is the most beautiful word in the dictionary”.
For those that may get blindsided by all the jargon on the subject, in Trump’s world the America First policy is all about tariffs and there is a strong focus on protecting domestic industries and promoting American interests - basically part of the whole “Make America Great Again”.
In simple terms, tariffs raise revenue for the US government and increase the prices of imported products, giving domestically produced products a price advantage for those citizens.
Tariffs can be both country-specific and product-specific, or a combination of both. While tariffs are typically applied to imported goods, they can also be applied to exported goods in some cases.
Watching the negotiations on tariffs has been anything but easy; in fact, it feels more like watching a high-paced and passionate tango between world nations!
The big “tariff tango” over the last week has all been about America’s dance partners, Japan and the European Union (EU).
The Japanese tango - Trump says the US has agreed to a "massive" trade deal with Japan, one of the country's largest trading partners. Japan has agreed to invest $550bn (£407bn) in the US, while its goods sold to America would be taxed at 15% when they reach the country - below the 25% tariff Trump had threatened. Both sides of this deal seem to have saved face to some extent. This deal and the narrative that is attached to this sent stocks upwards, not just in Japan, where share prices rose sharply, but worldwide, and the knock-on has so far been good.
The European tango – At the time of writing, a deal has not yet been struck, but the EU and US are progressing toward an agreement that would set a 15% tariff for most imports. Member states could be ready to accept duties at that level, and EU officials are pushing to have them cover sectors including cars. The outcome of the Japanese deal has made the EU (and the rest of the world) bullish on their deal.
So, what’s next on the tariff front? When it comes to Trump, nothing is certain, but we do know that 1st August 2025 is 90 days after Trump unleashed carnage on stock markets on 2nd April 2025, with his “Liberation Day” tariff package announcement (a somewhat ironic name for it, given our Channel Islands links). Following the fallout from his announcement, the White House postponed the April tariff increases for 90 days to allow time for negotiations. This takes us to 1st August, although one exception is China, which has until 12th August, and will possibly be the most complex of tariff discussions.
The next few weeks will indeed be telling; if things go well, then it could be positive for stock markets.
In light of all this uncertainty, a key question we have been asking our underlying fund managers is what impact Trump and his tariffs have had on the companies that sit in the underlying funds. As part of our investment monitoring process for the underlying investments in the Titan multi-manager range, we meet managers face-to-face at least once a year, and this is an opportune time to ask these sorts of questions. The resounding answer has been that the direct impact is minimal, but second and third-order impacts are less clear. However, we are confident that all our fund managers are keeping abreast of the situation.
Although it may feel like it’s Trump’s world, and we just happen to live in it, we are assured in the fact that our managers have been through this before. It’s not their first tango, and they are very experienced at navigating the dancefloor!
