The European private bank, which operates in regions including Asia, has joined other wealth management institutions in working out the implications of tariffs in the US and elsewhere.

While global markets have mainly shrugged off the impact of President Donald Trump’s tariffs, the damage further down the line from such protectionism may be harder to ignore, according to VP Bank. 

The Liechtenstein-headquartered private bank will concentrate on more portfolio diversification and will continue to hedge dollar exposure, it said in a note. 

“On the negative side, more difficult trading conditions prevail which will cost growth. In addition, there is a risk of productivity losses, and the danger is high that some countries try to mimic the US’ strategy,”  Felix Brill, Chief Investment Officer at VP Bank, said.  

“Trade conflicts could become fashionable again. The damage to the global economy would be immense. In addition, US consumers are likely to be confronted with price increases in the coming months. GDP growth in the US is likely to be lower than in previous years,” he said. 

A number of wealth managers have reflected on the impact of US trade and fiscal policy, and how to shield from the possible impact. Aberdeen, the UK-based investment house, has set out the case for why Asia has become a driver for global dividends in the current environment. Another firm, Union Bancaire Privée, has weighed in on the asset allocation implications of the trade and financial enviroment. 

Rupf reflected on where matters stand.

“The US has reached agreements with many important trading partners on the future terms for the bilateral trade in goods. In a nutshell, the conclusion is that the US is imposing a 15 per cent surcharge on most goods imports,” he said. “However, there are also countries that did not get a deal, such as Canada, India, Brazil and Switzerland. To some extent, this has ended months of uncertainty.

“More interestingly, on equities, investors are exposed to an uninterrupted flood of news from the US, above all on the subject of tariffs. Although trade agreements have been concluded with Europe and Japan, there are still differences on individual points. No agreement has yet been reached with China; the deadline has been extended,” Brill said. 

The Swiss shocker
Brill noted that Trump slapped a 39 per cent tariff on Swiss imports, while Brazil, India and Canada “are also among the losers for now.” Trump is also continuing to pressure the US Federal Reserve to cut interest rates.

“Despite these uncertainties, the global stock market has so far proved robust. The US technology exchange Nasdaq and Asian equities have fared particularly well, while the pan-European indices are lagging behind. Due to the many unanswered questions, increased volatility is to be expected in the coming weeks,” Brill added.