'A Pause That Refreshes' – US/China Tariff News Triggers A Market Rally

The Nuance

The constant stream of headlines, executive orders and policy pivots we’ve witnessed since Trump took power in January can be dizzying for any investor. It’s easy to get lost in the noise of it all, and it’s worth taking a step back to consider some longer-term investment thematics that to appear to be arising in the Trump 2.0 world. If current policies persist (which, as we have seen, can be a big “if”), we believe they may potentially influence markets and investment in three main ways in the medium term (in the next 3-5 years):

1. A potential trend of de-dollarisation: the administration’s goal of “global rebalancing” could mean a gradual move away from using the US dollar as the world’s reserve currency. For decades, the dollar’s been the default currency used in international trade. Countries have paid for oil in dollars, borrowed in dollars, and built-up reserves (like rainy-day money) in dollars. With a shift from a ‘unipolar’ to ‘multipolar’ world for international trade, the role of the dollar may shift over time. What this multipolar world will eventually look like in terms of currency regimes is yet to play out. However, it does remind us of the virtues of diversification; betting everything on one currency or economy brings with it substantial risk.
2. A new era of European Growth? After years of fiscal restraint and structural reforms, Europe appears to be shifting gears. The bloc is positioning itself for a period of stronger growth that could materially narrow the traditional gap with the US. A key catalyst is recent reforms in defence spending, especially in Germany, alongside coordinated EU efforts to boost investment in critical infrastructure. We are not suggesting that Europe will suddenly overtake the US as a growth engine, but rather that there could be an emergence of a more balanced and diversified global growth picture.
3. The end of US exceptionalism? Maybe not. Over the past decade, the U.S. has delivered structural growth and asset outperformance that other economies have struggled to match. Though it is evident that conviction amongst investors in the US has definitely softened this year, we believe that the long-term structural drivers of the US as an engine for growth certainly haven’t disappeared altogether. The US continues to lead in sectors critical to future growth, particularly technology and innovation. The rise of AI stands out as a major catalyst. With breakthroughs in agentic AI potentially on the horizon, we feel US companies are well positioned relative to global peers to capitalise on productivity gains and open up new market opportunities.

Markets are moving toward a more complex multipolar world. Navigating this landscape means accepting uncertainty, staying diversified to capture opportunity, and being ready for the unexpected shifts ahead.

The Noise

• Equity markets saw some meaningful moves this week: US equities have made back all their losses thus far in 2025 (in US dollarD terms), supported by relatively benign inflation data alongside China/US tariff de-escalation. In Europe, German equity markets hit record highs. Germany became the first major European market to recover all losses sparked by US tariff threats.
  
• In commodity markets, we saw volatile moves in oil this week, caught between optimism and oversupply. Prices rallied earlier in the week as easing trade tensions between the US and China lifted expectations for stronger global demand. However, reports of a potential US-Iran nuclear deal later in the week pulled prices back. If sanctions on Iranian crude exports are lifted, this could add further supply to an already well-supplied market, weighing on prices.

• The UK saw positive economic data, with growth accelerating at its fastest pace in a year. The Office for National Statistics (ONS) reported a GDP expansion of 0.7% in the first quarter of 2025, slightly above expectations, though we note these data predate the impact from Trump’s trade tariffs in early April. In terms of its market impact, they were minimal, with the pound somewhat higher against the dollar at $1.329 after the data were released.

The Niche

The Euro has an interesting semiotics (the study of symbols and signs). The symbol (€) takes inspiration from the Greek letter epsilon (ε), the first letter of “Europe”, while the two horizontal lines running through it are meant to represent stability.