Trump hikes tariffs. What it means for your investments

What happened?

US President Donald Trump has announced a significant hike in tariffs on imports, adding to worries about escalating global trade tensions.

Starting 5 April, a baseline tariff of 10% will be applied to all countries. A second round of higher tariffs will come into effect on 9 April for countries assessed to have “excessive” tariff or non-tariff barriers.

Here’s a look at some of the announced tariff rates:

• China: 34% on top of an existing 20%, bringing the total to 54%
• Europe: 20%
• Vietnam: 46%
• Japan: 24%
• Malaysia: 24%
• Singapore: 10%

European Commission President Ursula von der Leyen called the move a “major blow to the world economy”, highlighting the broader concerns around trade and global growth.

As of 5pm  on Thursday, global stock markets reacted negatively to the sweeping tariffs

• Hong Kong’s Hang Seng Index dropped 1.5%
• Japan’s Nikkei 225 fell by 2.8%
• Singapore’s Straits Times Index fell by 0.3%
• US stock futures also pointed to sharp losses.

In this post, I’ll dive deeper into how Trump’s tariff hike could impact your portfolio and what I will be keeping a look out for in the weeks ahead. 

How will Trump’s sweeping tariffs impact the market?

#1 – Tariffs may lead to elevated inflation

One concern that’s come up with the latest round of tariffs is how it might affect the cost of living.

Higher tariffs could mean higher prices on imported goods into the US, which may push inflation up again. 

We’re already seeing signs of this—just last week, the core PCE price index (the Fed’s preferred inflation gauge) rose by 2.8%. That’s above market expectations and still well above the Fed’s long-term target of 2%.

We’re also seeing signs that inflation expectations are starting to pick up again.

According to the University of Michigan survey, year-ahead inflation expectations in the US rose to 5% in March 2025. That’s the highest level since October 2022, and marks the fourth consecutive month of increases.

#2 - Trade uncertainty may lead to fall in corporate spending 

Business confidence in the US appears to be taking a hit from the uncertainty around tariff developments.

Many companies are pressing pause on their investment plans—a key driver of long-term economic growth.

The latest US ISM Manufacturing PMI dropped to 49.0 in March, down from 50.3 in February. Since a reading below 50 signals a contraction, this points to softer sentiment in the manufacturing sector

#3 – Potential economic slowdown

US consumer confidence has been on the decline in recent months, reflecting growing concerns about the economy and personal finances.

According to the Conference Board, the U.S. consumer confidence index fell to 92.9 in March from 100.1 in February—marking the fourth straight month of decline.

The expectations index, which gauges short-term sentiment around income, business, and employment conditions, fell sharply by 9.6 points to 65.2. This is its lowest level in 12 years and the second consecutive month it has remained below 80—a level often associated with recession risk.

In response to recent developments, several banks have revised their economic forecasts for the US.

Goldman Sachs has cut its 2025 GDP growth forecast to 1.5% from 2.0%. UBS also revised its growth forecast for 2025 to “closer to or below 1%,” following the latest round of tariff announcements.

Goldman Sachs also raised the probability of a U.S. recession to 35% from 20%. 

What would Beansprout do? 

#1 – Watch for escalation of trade war or reversal of tariffs           

The unexpected spike in US tariffs has added to global economic uncertainty—and several outcomes could still unfold from here:

• Potential retaliation: Other countries may respond with their own tariffs on US goods. As the US tariff strategy is based on ‘reciprocal tariffs’, this could lead to further hikes.
• Room for negotiation: President Trump has signalled openness to talks, which could lead to a reduction in tariffs if compromises are reached.
• Possible reversal: There is precedent for policy reversals. Earlier this year, the US delayed or rolled back announced tariffs on Mexico and Canada shortly after making them public.

Regardless of how these scenarios play out, the near-term impact of the tariff shock and continued uncertainty may already be weighing on global growth momentum.

#2 – More volatility ahead 

This situation highlights the increasing importance of managing geopolitical risks within investment portfolios.

As markets become more volatile, it is crucial to focus on portfolio diversification and hedging strategies.

For now, there may be near-term pressure on the S&P 500. You can check out the latest technical analysis on the S&P 500 with our weekly market review here. 

The economic uncertainty has led to a flight to safety amongst investors. This has led to higher bond prices and falling bond yields in recent weeks.

For example, the 10 year US government bond yield has fallen to 4.0% from 4.8% earlier this year. 

Likewise, the 10 year Singapore government bond yield has fallen to 2.6% from close to 3.0% earlier this year. 

Earlier, I shared how bond funds allow us to gain exposure to a basket of bonds which may see potential price appreciation if interest rates come down. 

For investors looking at safer investments, the current issuance of the Singapore Savings Bond offer a 10-year average return of 2.69%.

Singapore REITs may also benefit from lower bond yields, and we would look for REITs with strong assets that can demonstrate an ability to increase distributions.  Screen for top Singapore REITs with highest dividend yields here. 

The Singapore market has outperformed in the past few months amid global economic uncertainty, as it is seen as a safe haven market. In particular, diversifying with high-quality dividend stocks can offer both potential capital preservation and yield. Screen for top Singapore dividends stocks here. 

Lastly, gold remains a reliable hedge against geopolitical and inflation risks. Learn more about investing in gold in Singapore here.

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