Trade war escalation - time to trim some risk

CIO MONTHLY | OCTOBER 2018

The trade war has escalated. The path to de-escalation was already narrow - but it has now turned into the eye of the needle.


This month’s US tariff announcement amounts to a higher-than-expected 25% import tax on almost half of everything the US imports from China. This was well above expectations for a rate closer to 10%. President Trump has also given little room for China to negotiate, threatening tariffs on a further USD 267 billion (covering the complete landscape of all China’s US-bound exports) if China retaliates—even if this is less than a proportional response.

We are now choosing to trim some risk. This is not inconsistent with our ongoing desire to stay cautiously engaged with markets through the maturing phase of this cycle—we believe this global growth cycle has further to run. It is, however, about recognising shifting circumstances.