Trump’s tariffs are determining the outlook

The exact economic impact of US tariffs remains to be seen. The level of the tariffs on imports to the US announced by Donald Trump and already implemented came as a surprise to the financial markets, as did their global scope. The result was an abrupt initial revaluation in almost all asset classes.

A process has been triggered whose further course is difficult to predict. Uncertainty will therefore remain high, unless there is a U-turn in US trade policy, which we do not expect. Rather, the coming weeks and months should be characterised by a mixed news and data situation.

We do not expect any relief or a significant countermovement in the markets to the recent massive shifts as long as irritations remain a possibility, leading to erratic and even escalatory action. In our view, the uncertainty that has arisen, which has led to comparable highs in volatility with the financial crisis and pandemic, will only slowly subside in the financial markets.