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Emerging market equities are at risk due to newly proposed U.S. tariffs, which could raise average tariffs on imports to 24% by 2024, the highest since the 1920s. UBS warns that these tariffs, not yet priced into the market, may lead to downward revisions in expected earnings growth for the MSCI Emerging Markets Index, as 13% of its revenue comes from the U.S. and now faces a 35% tariff. The firm highlights potential impacts on global trade and economic growth, with emerging market currencies likely to weaken against the U.S. dollar.
UBS forecasts that the Reserve Bank of New Zealand (RBNZ) may implement a significant 50 basis point rate cut at its April meeting due to the adverse effects of US tariffs on global growth. This aggressive move could lower rates to 3.0%, potentially dipping below the neutral rate amid economic downturns. The RBNZ's proactive stance contrasts with other central banks, as it navigates the complexities of tariffs that could lead to disinflation in New Zealand while impacting inflation dynamics.
US tariffs announced by President Trump could raise the average tariff on imports to 24% by 2024, impacting global equity valuations and emerging market currencies. UBS warns that emerging market stocks, particularly vulnerable due to their reliance on US exports, may see downward revisions in earnings growth amid a slowing economy. The MSCI Emerging Markets Index faces significant risks as these tariffs are not yet reflected in market prices.
UBS analysts have set a near-term target of 5300 for the S&P 500 but caution that ongoing tariff uncertainties could push the index below 5000. Proposed tariffs may raise average U.S. import tariffs significantly, potentially leading to a 1.5-2% decline in real GDP by 2025 and inflation nearing 5%. Despite strong investor flows into equities, risks from slowing growth and rising credit spreads could pressure stock valuations, with a bear market becoming increasingly probable if tariff negotiations falter.
UBS has set a short-term target of 5300 for the S&P 500 but cautions that ongoing tariff uncertainties could push the index below 5000. Proposed tariffs may significantly impact GDP and inflation, while strong investor flows into equities continue despite potential downside risks from economic slowdowns and credit spread widening. The firm warns that persistent tariff issues could increase the likelihood of a bear market for US equities.
U.S. President Donald Trump's new tariffs, including a 10% baseline duty on all foreign imports and higher rates on specific countries, are projected to significantly hinder global GDP growth and increase inflation. Analysts warn that these measures could provoke international retaliation, with China and the EU pledging responses. Businesses express concern over the uncertainty these tariffs create for operational planning.
Deutsche Bank has issued a warning about a potential crisis of confidence in the U.S. dollar, highlighting that significant shifts in capital flow could disrupt currency fundamentals and lead to disorderly foreign exchange movements. Analyst George Saravelos noted that such a scenario could impose an unwanted disinflationary shock on the European Central Bank, especially if it coincides with a sharp euro appreciation and tariffs, creating a challenging environment for the ECB.
The dollar has sharply declined, dropping 1.7% to its lowest level since last autumn, amid concerns over US tariff policies. Analysts warn of a potential confidence crisis in the dollar, as its safe haven status erodes and international skepticism about the US economic outlook grows. This situation could lead to significant shifts in capital flows, posing risks for global central banks.
Deutsche Bank warns of a potential crisis in confidence regarding the US dollar, suggesting that shifts in capital flows could lead to disorderly currency market movements. An accelerated decline in the dollar could pose significant challenges for global central banks, particularly the ECB, which is wary of an externally induced disinflationary shock coupled with a stronger euro. The bank indicates that we are experiencing a dramatic regime change in the markets.
Higher-than-expected tariffs announced by US President Donald Trump have heightened expectations for further monetary policy easing by the Reserve Bank of India (RBI), according to a report by Barclays. This development suggests that a rate cut by the RBI is increasingly likely.
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