‘If he’d stayed on the golf course, we’d be in a better place’: experts on Trump’s tariffs, one year on

On 2 April 2025 the US imposed sweeping import tariffs, prompting a dollar decline and broad investor reallocation; payroll revisions cut 403,000 jobs, leaving a net addition of just 181,000 jobs in 2025. US manufacturing shed 100,000 jobs between Jan 2025 and Mar 2026 and manufacturing’s share of nonfarm employment fell to its lowest level since 1939, while the goods deficit hit an all-time high in 2025, indicating tariffs failed to narrow the trade gap. Consumer confidence slid to near-record lows by end-2025, investors moved capital toward Europe and China, and China’s industrial profits rose 15.2% year-to-Feb 2026, signaling a meaningful shift in global investment flows.

Analysis

Policy-driven political risk has re-priced the cross-border allocation decision: investors are demanding a higher sovereign and currency risk premium for US assets, which creates a multi-quarter window where non-US equities and FX can capture incremental portfolio flows. A sustained move in USD down by mid-single digits would mechanically lift reported dollar revenues for non-US exporters and likely re-rate European and Asian large caps before fundamentals catch up, producing a momentum-driven trade that can persist for 6–12 months.

Supply-chain reconfiguration is no longer theoretical — policy uncertainty speeds relocation of capital and manufacturing capacity to European and Southeast Asian hubs. Expect a 6–24 month capex cycle that favors automation, local-content suppliers, logistics infrastructure and industrial software vendors in those jurisdictions; incumbents exposed to long global supply chains will face margin pressure from dual-sourcing and higher short-term inventory costs.

Fiscal and institutional credibility strains are elevating term premia and correlation across risk assets, increasing the probability of regime-style volatility shocks rather than idiosyncratic drawdowns. The path to mean reversion is policy-dependent: a credible restoration of independent monetary governance or a negotiated de-escalation of trade/political posture can reverse flows within weeks, while entrenched fiscal deterioration would embed higher yields and a protracted risk-off environment over years.

Key Decisions for Investors

• EURUSD long via 6–12 month call spread or spot (size 2–3% notional). Entry: on intraday rallies in risk-off to buy dips; target EURUSD +8–12% in 6–12 months if cyclical capital rotation continues. Hedge: USD strength scenario with 1–2% portfolio stop; R/R: limited premium vs asymmetric payoff if FX flows accelerate.
• Overweight large-cap Europe exporters (e.g., EWG or VGK) vs underweight US small-caps (IWM) — pair trade sized to be market-neutral at 1:1 notional. Timeframe 6–12 months to capture reallocation and capex cycle; expect 8–15% relative upside if rotation continues. Risk: US-centric shock / stronger USD; use 3–6 month protective puts on the long leg.
• Overweight China/EM industrials via FXI or ASHR (size 3–5% total equity exposure) for 9–18 month horizon to capture redirected investment and trade share gains; hedge commodity/energy input risk with short natural resource equities or buying energy price caps. Risk/reward: concentrated upside if demand reallocation persists vs headline geopolitical escalation that could re-impose capital barriers.
• Tail hedges: buy GLD (1–2% portfolio) and allocate a small allocation to S&P 3-month 5–7% OTM put spreads (cost-efficient crash protection). This combination protects portfolio value from correlated risk-off spikes while keeping carry low; expected cost 30–80bps annualized depending on strike, acceptable given elevated regime risk.