As trade deals come through, uncertainty declines
Barbara Reinhard, CFA
CIO, Multi-Asset Strategies and Solutions
Recent trade agreements with Japan and the EU are reshaping the U.S. economic landscape. Should you reshape your portfolio to match?
Both the Japanese and European trade deals impose a 15% tariff on imported goods while unlocking major capital inflows: a $600 billion investment commitment and a $750 billion U.S. energy purchase commitment from the EU, and a $550 billion investment commitment from Japan.
Together, these developments have helped reduce the estimated effective U.S. tariff rate to around 17%, down from 19% before the two agreements, according to The Budget Lab at Yale. While early tariff effects are beginning to show in last month’s consumer prices—appliances rose 1.9%, household furnishings 1.0%, and apparel 0.4%—the broader economic backdrop remains resilient.
Declining economic uncertainty at home and rising headwinds abroad are reinforcing the relative strength of U.S. markets. In this environment, we continue to favor high-quality U.S. companies with strong pricing power and operational flexibility. U.S. large caps remain our preferred allocation over international equities.
Maverick Lin contributed to this article.