How do you think tariffs might affect international equities in 2025?
Tariffs are going to affect international equities in 2025, primarily because of uncertainty. The uncertainty that obviously comes with the recent Trump election is that the level of tariffs is going to mean that, at the end of the day, we are going to see (at least from the perspective of consumer prices) inflation potentially go up. But, from our perspective, we also believe that some of the other reform that is coming from the Trump administration – whether it is smaller government, more growth-oriented tax policy – may counteract some of these tariff effects. So, in the end it may be a wash.
Are there any sectors or regions you think might be impacted?
This is a good question. We have already heard some of the ramblings of the Trump administration that we may see some higher tariffs on Canada, Mexico, and China. Those are the biggest source, but I would say any nation in the world that has a current account surplus with the US may be under threat.
From a sectoral perspective, I would argue that tariffs are going to be against the automotive industry, particularly as it relates to protecting both Europe as well as the US from Chinese imports, and then other sectors, they are going to be across the board. We believe that tariffs are going to be a negotiating tool and an escalation or de-escalation tool from the Trump administration. So, we do not believe that on the margin tariffs are going to hurt that much, but it is something that every sector has to contend with.
