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So here we are. Just a few short months after his inauguration, U.S. President Donald Trump has fired the opening salvo of a global trade war.
While precise estimates on the new U.S. average effective tariff rate vary, there is broad consensus that it is well north of 20%. That is a stark difference from where it was a few months back (around 2-3%), and it signals a return for the U.S. to restrictive trade policies not seen since the days of the Great Depression just under a century ago.
As we update our quarterly portfolio strategy, we’re reminded of an important lesson that often must be re-learned. Namely, that markets are terrible at forecasting non-linear events.
To wit, we are preparing this edition just ahead of the “America First Trade Policy” memorandum is scheduled to be released. That release is expected to recommend additional country-specific tariffs to be implemented based on the principle of reciprocity and other non-tariff barriers.
Additionally, tariff exemptions on USMCA-compliant imports from Canada and Mexico are set to expire on April 2nd while the threat of sector-specific damage on autos, semiconductors and pharmaceuticals still looms large.