President Trump’s trade war with two close U.S. allies and China is constantly in flux. Trump continues to impose, rescind, and revise tariffs at a dizzying pace, angering adversaries, baffling allies, befuddling investors, and roiling financial markets. Don’t expect this campaign to end anytime soon.
 

A multi-front battle: Canada, Mexico, and China

In the military, campaigns are often characterized as large in scale and long in duration, encompassing a series of battles designed to achieve a specific objective. Trade wars can be discussed using similar vocabulary—and the war Trump has launched is just getting started.

The battlefront opened with tariff threats that materialized and disappeared so quickly that for a moment it seemed like the war was over before it began. With little warning and no time for a resolution via traditional diplomacy, Trump announced 25% across-the-board tariffs against Canada and Mexico, and additional tariffs on China (including a proposal to impose large fees on Chinese ships visiting U.S. ports). Mexico put some troops on the border, Canada paid lip service to the new administration in Washington, and China largely dismissed the whole thing, as tariffs have whipsawed between being in effect, paused, or with certain exclusions. On March 6 (the date of this writing), Trump announced an exemption through April 2 for tariffs on imported goods from Mexico that are covered by the United States-Mexico-Canada Agreement (USMCA).

What’s next? The battlefield goes global

Not content to rest after attacking America’s largest trading partners, Trump used his Congressional address to announce that he would impose reciprocal tariffs on every nation that trades with the U.S., effective April 2. It’s a target-rich environment.

What to do?

The shock-and-awe approach to tariffs reflects the tone and tempo of Trump’s second term. We anticipate more of the same in the weeks (and perhaps months) ahead.

Although tariffs are disconcerting, they are really no different than any other disruptive development (banking crisis, market correction, financial crisis, etc.) that temporarily pushes stock prices lower. For investors with a long-term perspective, there is no reason to make changes to a well thought-out investment plan—maintain well-diversified portfolios across asset classes, sectors, and global markets. Even in the short term, the situation is too fluid to make large tactical changes. For most investors, it makes sense to avoid making knee-jerk moves base on the latest news headlines.

Index definitions

The MSCI Canada Index tracks the performance of the large- and mid-cap segments of the Canada equity market.

The MSCI China Index tracks the performance of large- and mid-cap stocks in China.

The MSCI Mexico Index tracks the performance of the large- and mid-cap segments of the Mexican equity market.

The MSCI USA Index tracks the performance of the large- and mid-cap segments of the U.S. equity market.








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