Since his January 20th return to the White House, President Donald Trump’s tariff shifts have been an unpredictable roller coaster ride. The saga remains a situation “in flux” and one that could have serious implications for the global economy. However, at the time of writing (26 May 2025) no one knows where the tariffs will eventually land, nor what concrete agreements between the US and its global trading partners will result.
By Martin Connaghan, Samantha Fitzpatrick, Co-Managers of Murray International Trust PLC
Fears focus on the threats to economic growth and inflation around the world (not least the significant inflationary impact that could be borne by US citizens). As things stand, financial markets are volatile, continuing to chop and change in response to each bit of speculation and new Trump threat.
“Make in America”
Trump’s broad ambition is to address trading imbalances between the US and its global trading partners. He is keen to remove unfair trading practices, reduce imports and expand domestic manufacturing (‘Make in America’).
April 2 was the President’s so called “Liberation Day”, which introduced a baseline 10% tariff on all US imports, alongside a raft of additional ‘reciprocal tariffs’ targeting dozens of countries. An initial 54% tariff on Chinese imports quickly escalated to 145% after retaliatory measures from Beijing. These moves triggered sharp declines in global equity markets, notably in US stocks. A subsequent sell-off in the US Treasury market led to the largest spike in yields in over 40 years, prompting the administration to partially reverse course.
On April 9, the tariffs beyond the baseline 10% rate were suspended for 90 days, except in the case of China, and further levies on carmakers were removed late in April. Against this backdrop of uncertainty, many companies understandably revised or withdrew their earnings forecasts.
Tit-for-tat with China
China, considered the very worst tariff offender of all, had received the biggest punishment. Tit-for-tat tariffs and retaliatory measures continued throughout April, with US tariffs on Chinese imports (and vice-versa) skyrocketing before Chinese-US negotiations took place in early May and the levies were reduced by both sides and some were suspended. So, a truce is in place but what happens next, only time will tell.
UK and US reach trade pact….
The US and UK announced a trade pact between the US and the UK in early May. The standard 10% base tariff remains in place but concessions were agreed by both sides, such as reduced tariffs on UK car exports from 27.5% to 10% and UK market access for US beef exports. Trump’s “Truth Social” social media platform proclaimed on 23 May that “our negotiated deal with the UK is working out well for all”.
… while EU negotiations fell apart
Things can change quickly under a Trump presidency: in late May, trade tensions between the US and the European Union erupted when Trump dismissed ongoing discussions with the EU bloc as “going nowhere”. This may prove to be a simple negotiating tactic, but the threat to introduce 50% tariffs on the EU sent shockwaves through global markets that day. Then, just three days later, it was announced that Trump’s threat had been deferred until 9 July to allow more time for talks.
Despite the threatening rhetoric, we still think that the broad reality of Trump’s tariff regime is likely to be more nuanced. The US doesn’t have the capacity or the skillset to replace all imports with domestic options any time soon and he will be conscious about raising inflation. Countries are likely to respond to tariffs in kind, as we have already seen. It would be naïve of the US to assume that the impact will all be one way.
Managing a portfolio while tariff uncertainty lingers
At Murray International (MYI), our overriding approach so far this year has been one of caution: we look at the world and we see a myriad of issues, be they geopolitical pressures, the rising cost of living, muted economic growth, higher-for-longer interest rates, not to mention tariffs. However, the situation does not keep us awake at night. The biggest advantage we have is the flexibility of our investment mandate. We’re simply looking to invest in around 50 companies that can deliver strong and rising income and growth of capital. We’re not bound by sectoral or geographical constraints so we can focus on what we believe are the best investment propositions around the world. It’s a good place to be, whatever the backdrop.
Of course, we can’t ignore tariffs. It’s important to understand where the potential vulnerabilities are within our portfolio and try to put some parameters around its possible impact. We hold Germany’s Mercedes Benz, for example. We need to understand how tariffs could impact the car manufacturer’s supply chain and push up its prices, which in turn could influence demand. The uncertainty is clearly unhelpful.
We have been through this before, with companies such as Pernod Ricard. China imposed anti-dumping tariffs on EU brandy imports in October 2024, hitting sales of the French firm’s Martell Cognac brand. Pernod Ricard saw its sales in China drop 25% overall in the first half of its 2025 financial year. However, this type of issue will rarely make or break the type of companies we hold and may even be a buying opportunity if the price over-corrects.
This is an environment that requires flexibility. We need to be alert to companies that could have vulnerabilities and assess the potential outcomes. The situation is frustrating but should become clearer over time, and we will be able to gauge how companies are handling it. However, tariffs are not new, and good companies can navigate these threats.
Facing challenges with confidence
Negotiating financial markets remains as challenging as ever. As we look forward, the geopolitical environment remains polarised and uncertain, bringing opportunities and risks. We still expect that interest rates may be higher for longer than many had expected, leaving governments counting the costs of existing debt levels and expanding fiscal deficits. These uncertainties will continue to dominate the headlines and impact investor sentiment and, at times, the direction of capital markets.
We will wait and see whether tariff threats convert into additional tariffs actually being introduced. We remain calm as we believe the current market conditions favour the “bottom-up” investment approach that we use to identify the companies that can successfully navigate the challenges they will face. We will continue to maintain a truly global portfolio, diversified by region and sector, in companies exhibiting robust earnings, strong balance sheets, and positive, growing cash flows, a portfolio which we believe can deliver a combination of long-term growth in revenue and capital ahead of inflation.
Podcast: High-yield investing with Martin Connaghan of Murray International
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