Caution during periods of compla­cency

Stock markets shake off trade tariffs

Around five months ago, the US presi­dent’s announce­ment that he would impose high import tariffs triggered a shock reaction on the stock markets. After just one month, global stock markets had fully recovered and have been climbing from record to record ever since, undeterred by the fact that the effec­tive US import tariff rate remains at around 17%, the highest level since 1935. So is that the end of the matter?

Creeping brake effect

Import tariffs act like a consump­tion tax: they make products more expen­sive and slow down demand. However, their effect is only felt after a delay, as importers initi­ally sell their stock at the old prices or exporters tempo­r­a­rily bear the tariffs themselves. Accor­ding to the indepen­dent Yale Budget Lab, this is currently weighing on US GDP by −0.5% and is likely to rise to −1.0% by mid-2026. If they remain in place perma­nently, the tariffs would reduce growth by around 0.4% per year.

Skid marks on the job market

If tariffs remain at their current level (which seems likely at present), US economic growth is likely to weaken further in the coming months. Around 480,000 jobs could also be lost by the end of 2026. This trend is confirmed by the latest labor market data.

To counteract this develo­p­ment, the US Federal Reserve is expected to further lower its key interest rates at its upcoming meetings. However, this monetary policy norma­lization will only provide relief for the economy after a certain delay.

Diver­ging growth prospects

The growth outlook in the other two major economic regions is signi­fi­cantly more favorable. On the one hand, the effect of US tariffs on global GDP (exclu­ding the US) is likely to be only around −0.1%. On the other hand, interest rate cuts and additional fiscal policy stimuli are already provi­ding tailwinds for consump­tion and invest­ment.

Overall, it can there­fore be assumed that the growth diffe­ren­tial will shift in favor of the rest of the world and to the detri­ment of the US.

In light of this diver­gence, combined with initial warning signs of overly optimi­stic market senti­ment and high valua­tions, we are reali­zing partial gains on US techno­logy stocks in isolated cases.

Publisher: Tareno AG, Garten­strasse 56, 4052 Basel, Switz­er­land, Tel. +41 61 282 28 00, info@​tareno.​ch, www.tareno.ch. We welcome feedback on our publi­ca­tion. The content herein is for infor­ma­tional purposes only. The publi­ca­tion does not contain any legal or invest­ment advice or invest­ment recom­men­da­tions, nor does it consti­tute an offer or solici­ta­tion to make an invest­ment.

Images/graphics: The graphics were created by Tareno AG from public market data.