Market volatility updates

Rising tensions between the US and a number of its key trade partners caused financial markets to dip this week. But as negotiations get underway, markets have already started to ease.

Last weekend, US President Donald Trump revealed his plans to introduce tariffs on a number of key trading partners – China, Canada and Mexico.

The news caused a stir in markets on Monday, as the S&P 500 fell modestly by nearly 1.6%. It quickly recovered though as the US reached an agreement with its neighbouring nations to delay the tariffs by one month.

The tariffs for China, on the other hand, have gone ahead as planned. And China has responded, introducing tariffs on a number of goods and commodities from the US including energy supplies and vehicles.  

A tariff is an additional tax that businesses must pay on imported goods depending on the type of product and where it’s come from.

So if a US company imports a product, such as mobile phones from China, that American company would have to pay an additional fee on top of the original price.

The purpose of imposing tariffs is to encourage companies to source alternative suppliers within the US, while also offering the government an additional source of income. But it could also end with the consumer having to cover these extra costs, which could push inflation back up.

While markets fell at the beginning of the week, things have started to calm.

Coming into 2025, the experts at Coutts behind our investment offering believed many of the driving factors behind America’s strong performance last year would continue. Their outlook on the US was for no recession, taming inflation, and strong company earnings leading to positive market performance.

They believe this is still the case.

Fahad Kamal, Chief Investment Officer at Coutts, says: “While tariffs may cause further periods of short-term market volatility, we maintain the view that US economic growth should remain positive.

“We will continue to analyse the impact this could have on supply chains. China, Canada and Mexico are some of the biggest suppliers to the US and these tariffs will undoubtedly cause bottlenecks.”

Fahad adds, “We believe in focusing on the long term when investing, rather than making any sudden, reactive moves to an evolving situation. Trying to time when to invest in the market could result in missing out on positive gains.” 

Trump said during his presidential campaign that he wanted to introduce these tariffs. So the recent events were widely expected and the Coutts team have been monitoring the situation.

Their investment strategy takes a global approach, which means our funds are diversified across various regions and sectors to help navigate these risks. They also invest in global government bonds which offer further diversification.

There is a chance that Trump introduces more tariffs against other allies, including Europe. But with that said, there is also the chance of successful negotiations which could de-escalate a trade war – something we’ve already seen this week with Canada and Mexico.

The Coutts experts will continue to review the situation and are ready to take action should they think it’s necessary.