US President Trump’s fresh tariffs are expected to have a negative impact on global trade, and the levies could hurt the global business cycle, especially in Asia, Stefan Hofer, Chief Investment Strategist at LGT Private Banking Asia Pacific has said.
"The reason being is that US is not applying punitive tariffs to China alone (at a 54% rate), but also to southeast Asian economies and Taiwan as well. This means that the transhipment of exports via third party countries will not be a viable way to circumvent tariffs destined for Chinese firm," he said in an interview to Moneycontrol.
For India, Stefan Hofer is of the view that tariff at a 26% represents a relatively high rate, compared to the European Union (20%) or the United Kingdom (10%). However, it has been reported that Pharmaceuticals are exempt, which may offer India some relief, he said.
Edited excerpts:
How do you view the fresh tariffs announced by Donald Trump, and which sectors will be affected the most?
The new US import tariff regime has a sweeping 10% baseline minimum level, for virtually all trading partners. In this sense, every sector that is involved with US trade will be impacted in some form, but it remains too soon to make absolute predictions on safe harbours. Based on exemptions that have been reported, Pharmaceuticals may find some respite.
Do you expect a major (negative) impact on global trade and a hit to the business cycle, especially in Asia, if Trump continues to announce tariffs in the coming months?
In short, yes. The reason being is that US is not applying punitive tariffs to China alone (at a 54% rate), but also to southeast Asian economies and Taiwan as well. This means that the transhipment of exports via third party countries will not be a viable way to circumvent tariffs destined for Chinese firms.
Do you foresee a major economic slowdown in the US?
This is the most important question facing investors now. There are two possible scenarios: one, the high tariffs are used as a negotiating tactic and may come down as US demands on trading partners are subsequently met. For example, a country may remove non-tariff barriers and allow US goods to enter their market. The second scenario sees high tariffs in place for the medium term, in which case we see a relatively high chance for stagflation and recession. That US recession could then drag down global growth.
If you expect a US slowdown, will the Federal Reserve consider more than two rate cuts to support growth?
The path of US interest rates is now very uncertain. The Federal Reserve has been very quiet in terms of commenting on US trade policy. The few words that have been spoken see tariff-induced inflation as being transitory in nature. On balance, given new risks to growth, we see a more dovish Fed moving forward.
Will the fresh tariff announcements be less negative for India?
India is also being tariffed at a high rate of 26%. This represents a relatively high rate, compared to the European Union (20%) or the United Kingdom (10%). It has been reported that Pharmaceuticals are exempt, which may offer India some relief.
Do you expect gold to continue its rally given the policy uncertainty?
Yes, we see further modest upside to the gold price, predominantly as a hedge against geopolitical risk and rising inflation pressures.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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