Good afternoon,

After multiple escalating and de-escalating headlines in recent weeks, here is where we stand today with respect to tariffs and highlight several future considerations to keep an eye on.

What are the most news-worthy events with respect to tariffs?

• The U.S. and China took meaningful steps over the past weekend to de-escalate trade tensions, with both sides agreeing to slash tariffs on each other’s products for 90 days.
• 25% sector-specific tariffs on steel, aluminum, automobiles, and auto parts announced in March and April remain in place, albeit with some rebates for vehicles assembled domestically and a partial exemption for the U.K.
• 10% universal tariffs announced on April 2nd’s “Liberation Day” remains in place, with exemptions for some electronics (including smartphones and semiconductors), critical minerals, and energy.
• Reciprocal tariffs are on hold for 90 days from April 9th, and USMCA-compliant imports from Canada and Mexico are also exempt from 25% tariffs.
• The only significant, new country-specific tariff is against China, an additional 20% aimed at curbing the flow of fentanyl into the U.S.

What are the implications on economic growth?

A tariff is essentially a tax that is likely to be borne by consumers in the form of higher prices. Accordingly, the rolling back of tariffs should provide some relief to consumer spending. Directionally, many economists would argue that global GDP growth would likely downshift compared to a pre-tariff’s environment.

Therefore, it’s crucial to remember that most tariffs have only been paused and it would be dangerous to assume we are out of the woods. An escalating scenario where “liberation day” tariffs and other non-tariff related restrictions are imposed, as well as a breakdown of bilateral negotiations between the U.S. and its key trading partners are still plausible.

What are future key dates and other dynamics to keep an eye on

• July 8th marks the date where the 90-day pause on global reciprocal tariffs is set to expire (August 12th for China). As it is unlikely for the U.S. to negotiate deals with 100+ countries in the next two months, it is likely that the pause on reciprocal tariffs will be extended for countries that have been negotiating in good faith.
• Deals with Canada and Mexico will be in focus given these countries account for almost a third of all imports into the country. Trade deals with the U.S.’s neighbors would likely get wrapped into a renegotiation of the USMCA.
• Elsewhere, the U.S. has hinted trade deals with ally nations such as Korea, Japan, Australia, and India should be relatively easy to do. By contrast, a deal with the European Union appears more difficult, given their need to govern by consensus. In other words, a new trade proposal with the EU would only be adopted if all member countries agree.
• New sector-specific tariffs (such as copper, timber and lumber, semiconductors, pharmaceuticals, and critical minerals) are another area to watch given Section 232 investigations are still underway.

We remain cautious, watchful, but invested, and note financial markets are still highly sensitive to surprises on the policy front. If you have concerns, this is a great time to revisit your financial plan and portfolio strategy as staying informed and maintaining perspective can help you stay confident during uncertain times.

Stay the course,

Devin