Tariffs challenge: What markets are and aren’t pricing in

MARCH and early April saw a surge in volatility with global equity markets falling; extreme two-way swings in US bond yields; gold prices pressing substantially higher; and the greenback sliding as uncertainty about the path forwards for the global economy and the global order grew in only the third month of US President Donald Trump’s term in office.

Indeed, the new administration unveiled wide-ranging tariffs in early April, and markets moved to price in the prospect that these actions would put a medium-term dampener on economic growth, as well as upward pressure on inflation with an effective tax on the American consumer and businesses.

Patrice Gautry, UBP chief economist, estimates that tariffs could push average headline inflation above 4 per cent depending on the breadth of implementation and potential retaliation, with US economic growth potentially falling to less than 1 per cent in the quarters ahead.