Justin Onuekwusi, Chief Investment Officer at SJP, gives his views and offers reassurance on the recent market volatility, caused by the US tariffs.
Global markets were left reeling last week, as the US introduced near-blanket tariffs across trading partners. Speaking on Wednesday, President Trump announced a minimum tariff of 10% on nearly every country, including the UK.
Other countries received substantially harsher terms. For example, imports from EU countries will face 20% tariffs, while those from Japan will face 24%. Chinese imports, meanwhile, will receive an additional 34% tariff on top of the 20% they already face.
These tariffs are due to go live from 9 April, giving other governments very little time to react. If they go live in their current form, these tariffs will amount to the largest US tax hike in 40 years.
So far, policy responses from other countries have been mixed. Vietnam, for example, offered to remove all tariffs on US imports, according to several sources. On the other hand, China announced that US imports would receive an additional 34% tariff from 10 April.
The EU is yet to provide its official response, though it is expected to announce new tariffs of its own on various US products.
In the UK, meanwhile, the Prime Minister wrote in the Telegraph that the Government’s position would be to “Keep calm and fight for the best deal.”
Perhaps unsurprisingly, stock markets have taken the threat of a global trade war rather badly. Markets fell on Thursday and Friday, as trillions of dollars were wiped from the stock market. The falls have so far continued (as at the time of writing – Monday 7 April).
Over the course of the week the FTSE 100 fell 6.97%, with the MSCI Europe excluding UK Index dropping 6.95%. The situation was similar in Asia, where the Japanese Nikkei 225 declined 6.01%. Falls were even worse in the US, where the S&P 500 and NASDAQ ended the week down 9.05% and 10.0%, respectively.
What this means for investors
While market falls can be difficult to live through, it is important to remember they are a feature of investing. Market falls of 10% are not rare occurrences compared to the long history of equities. However, decisions you make when these occur can significantly impact your long-term returns.
Making reactive selling decisions when markets are volatile can be very challenging as these become market timing decisions. Markets can fall and/or rebound faster than we can participate in them. Instead, for investors in already resilient well-diversified portfolios, taking little or no action has has often led to better long-term outcomes, based on historical data.
Regardless of the current market topics and noise, markets are driven by behaviours. It’s important to be aware of behavioural biases leading to irrational decisions that stray away from process and principles.
For his part, so far Trump has indicated he plans to stay the course. On Sunday he told reporters: “I don’t want anything to go down, but sometimes you have to take medicine to fix something.”
Outside the immediate market reaction, these tariffs are likely to lead to an increase in inflation in the US. At the same time, they are likely to reduce GDP growth and push unemployment higher, meaning the tariffs could potentially lead to an increase in stagflation fears.
This will also have an impact on the Federal Reserve’s policy on interest rates. As a result, markets are beginning to price in more interest rate cuts of 2025 than they did previously.
The only certain thing right now is we’re facing uncertainty. We still don’t know how several major economies plan to react, nor do we know how the US will respond to these reactions.
At the moment, any decision that we make should reflect the fact that uncertainty is high. We’re not going to be able to predict our way out of it, nor should we try.
There will be narratives around how different things are now, how the world is changing. It was the same in 2008 and during COVID. It’ll be the same now. But history shows that if you’ve got a good process, then you should be sticking with it.
Periods of political and economic uncertainty often test investor resolve, but history has repeatedly demonstrated the importance of diversification, discipline, and a long-term perspective. While short-term market volatility can be unsettling, staying calm and avoiding impulsive decisions is essential - this is when behavioural missteps can be most damaging. Investors who stray from their long-term strategy during turbulent times risk locking in losses and missing out on the recovery that often follows. Our portfolios remain grounded in these core principles, and we continue to monitor market developments closely.
Justin Onuekwusi
Chief Investment Officer
St. James's Place
Wealth Check
The moves by the US to implement tariffs on trading partners is likely to have many unforeseen impacts, according to investment experts at SJP.
According to the US Census Bureau, in 2024 the US imported $4,110bn of goods and services. Now, the vast majority of these imports will face an additional tariff of at least 10%.1
Hetal Mehta, head of economic research at SJP, says that while it was well known President Trump was looking to implement reciprocal tariffs on key trading partners, there had been uncertainty as to what this would look like in practice. While the US has large trade deficits with many of the affected countries (meaning the US imports more than it exports to them), several were also close geopolitical allies, with tightly intertwined economies and supply lines.
While Hetal points out these tariffs are unlikely to be as disruptive to supply chains as the pandemic, they will likely change relationships between countries. But it isn’t just a matter of switching suppliers or emphasising buying domestically, Hetal notes. For one, it takes time to build supply capacity from other regions and areas to fill current demand. For another, there are also non-tariff barriers with other countries – such as regulation.
Hetal says: “You can’t just jump to another supplier that easily. So, will these non-tariff barriers get watered down? Where will the trade get re-rerouted to?”
She adds that already the US consumer buys more than the US can supply, which is why it imports more goods than it exports.
“One way or another the US consumer will pay for tariffs – they are on the hook. The impact could be, firstly, higher inflation; secondly, higher interest rates to combat that inflation; and, thirdly, higher taxes for households. The latter is because the intention is to funnel the profits of the imposed tariffs to lower US corporate taxes. If the US were to reverse this action in the future, they may find it difficult and have to turn to consumers to pay that bill.”
Source: 1 US Census Bureau: US International Trade in goods and services, December 2024.
Last week saw some of the greatest levels of uncertainty since COVID back in 2020. However, history has shown that keeping a steady course and taking little action when significant deviations occur between asset classes has produced favourable long-term outcomes. SJP’s portfolios have been constructed with diversification at their core, and the decisions the investment team has made over the past year reflect this strategic approach.
Past performance is not indicative of future performance.
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SJP Approved 07/04/2025
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Piotr Kasprzak
Financial Adviser, Wiltshire Wealth Management, Partner Practice of St. James's Place
