Tensions Rise Between U.S. and Trading Partners Amid Trump’s Tariff Promises

Tensions are escalating between the United States and its major trading partners as former President Donald Trump announces plans to impose a 10% tariff on all U.S. imports and over 60% on Chinese goods if he is re-elected. Following an attempted assassination on Trump, market speculation about his potential return to the presidency has intensified, raising concerns for investors. Historical data from the periods of U.S.-China trade tensions between 2018 and 2020 indicates that the MXCN Utilities index outperformed the broader MXCN index by an average of 12.8%, suggesting a potential shift in investment strategies. Goldman Sachs has highlighted that Europe’s GDP and corporate earnings could be adversely affected by these tariffs. The bank's report, released on July 17, identifies defensive sectors such as utilities and healthcare, along with a group of major European companies termed "GRANOLAS," which includes firms like GSK, Roche, and Nestle, as potential beneficiaries amid rising trade risks. This shift in focus reflects a broader strategy to mitigate the impact of tariffs on European markets. If Trump secures re-election, Goldman Sachs expresses optimism for a basket of European stocks with significant U.S. operations, as many European manufacturers have relocated production to the U.S. Key companies in this basket include Air Liquide, British American Tobacco, and Stellantis. Meanwhile, a recent tech correction suggests a slowdown in Mega Tech earnings, which could present buying opportunities for investors if the anticipated AI narrative unfolds as expected.