BlackRock Bulletin

Assessing the impact of escalating trade tensions

The BlackRock Investment Institute and its BlackRock partners share our insights on the fast-moving developments of U.S. trade protectionism, the world's response and what it means for financial markets and our investment views. See a rolling page of our real-time views below.

Taking stock of U.S. tariff pause

April 11, 2025

Key views

  • 01

    Newly announced U.S. tariffs have been paused, but trade tensions with China are set to deepen.

  • 02

    We see three primary types of U.S. tariffs: sectoral, universal and country-specific.

  • 03

    We extend our tactical investment horizon back to six to 12 months to dial up risk.

The U.S. has paused newly announced tariffs for most countries for 90 days, just hours after they took effect and unleashed volatility almost on par with the biggest market shocks of the past few decades. President Donald Trump suspended the extra “reciprocal” tariffs on all countries except China, now facing tariffs of at least 145%. The 10% universal tariff remains. Trade tensions with China are deepening, and significant uncertainty remains. Yet the pause suggests that the U.S. administration is taking some account of financial risks and costs as well as a country’s willingness to engage, putting a check on a maximal stance during the negotiations. As a result, we extend our tactical horizon back to six to 12 months from three months to dial up risk.

This is a major development, particularly in easing the near-term risk of a financial accident. Yet we need to brace for unpredictable negotiations, and the U.S. is still likely to end up with much higher tariffs than we expected a few weeks ago. We estimate the average effective tariff rate is now around 20%, even with the pause. We see three primary types of U.S. tariffs. First, tariffs on strategic sectors to support reshoring of activity — so far, 25% levies on autos and parts, and on steel and aluminum, with sectors like lumber, semiconductors, pharmaceuticals and copper likely next. Second, a universal 10% tariff on most imports to generate revenue and aid domestic production. Third, country-specific tariffs on roughly 60 nations with goods trade surpluses with the U.S., intended to provide negotiating leverage to reduce imbalances.

U.S. tariffs add to inflation, and ongoing uncertainty is raising the risk of a recession. Prolonged policy uncertainty may weigh on corporate capital spending and delay longer-term commitments. Consumer spending could be hurt by any erosion of wealth and real incomes. The dented confidence of foreign investors in the U.S. could curb their appetite for U.S. assets. For China, we see tariffs lowering growth – and potential policy stimulus only partly offsetting that drag.

We cautiously lean into risk and shift our tactical horizon back to six to 12 months from three months. We up equity exposure, including to U.S. and Japanese stocks. Yet we expect ongoing volatility and potentially sharp reversals. Selectivity across sectors and securities will be key, and we are wary of chasing momentum. We see opportunities in U.S. technology and global banks, especially European, hurt by the broad-based selloff. Long-term U.S. Treasuries have failed to offer ballast during the stock selloff against a backdrop of persistent budget deficits and sticky inflation. We favor gold as a portfolio diversifier.

Download the PDF report Download the PDF report

Reducing risk as uncertainty hurts markets

April 4, 2025

Key views

  • 01

    Trade tensions have triggered a risk asset selloff. We see volatility persisting for some time and reduce risk-taking.

  • 02

    We expect tariffs to lower growth and boost inflation globally. In Europe, higher fiscal spending could limit the drag from tariffs.

  • 03

    We shorten our tactical horizon to three months. We turn neutral on U.S. equities and prefer short-term Treasuries.

The significant escalation in trade tensions this week and extreme trade policy uncertainty has triggered a broad risk asset selloff. The S&P 500 is down 10% in just two days and U.S. high yield credit spreads – that had been resilient to the initial equity pullback – have widened sharply this week. Both have seen their largest moves since the 2020 pandemic shock. These losses are happening even as U.S. economic fundamentals remain solid, underscored by today’s strong U.S. jobs report.

We expected risk assets would remain under pressure until uncertainty starts to dissipate. But this week’s developments suggest pressure could grow – and it is now less clear over how long or short a period policy uncertainty could cloud the outlook. We now expect a bigger growth drag and inflation boost. Many countries are preparing responses to U.S. tariffs. China has kicked off with 34% tariffs and other measures, including export controls. Yet the full set of international responses and country-by-country negotiations with the U.S. will take time, making it hard to have visibility on when and how this will settle. Major wealth destruction could hurt sentiment and spending. Contrary to markets, we do not see the Federal Reserve being able to offer much of a response.

We still believe U.S. equities will eventually reclaim global leadership. But for now, this week’s developments lead us to reduce risk and shorten our tactical horizon to three months. If clarity comes quickly, we would up risk-taking again. Shortening the horizon means giving more weight to our early view that risk assets could face more near-term pressure, so we reduce equity exposure and allocate more to short-term U.S. Treasuries that could benefit as investors seek refuge from volatility. We stay underweight long-term Treasuries given persistent U.S. deficits and sticky core inflation – even before the impact of tariffs. Federal Reserve Chair Jerome Powell today stressed the importance of price stability, reinforcing our view that market pricing of four to five Fed rate cuts this year is overdone. We think gold can serve as a better return diversifier in this environment.

While we are more cautious about broad benchmarks, sharp selloffs and market dislocations are already creating opportunities for security selection. We still see mega forces such as artificial intelligence driving returns. U.S. policy shifts are spurring fiscal spending globally. In Europe, Germany’s €1 trillion package for defence and infrastructure investment is creating opportunities in the defence sector. We don’t think the growth and earnings outlook yet supports sustained European equity outperformance but a broader macro opportunity could emerge if the EU finds a way to jointly issue bonds to fund investment across the bloc, as it did in the pandemic.

Download the PDF report Download the PDF report

Finding a path through near-term volatility

April 3, 2025

­Market take

Weekly video_20250403

Glenn Purves

Global Head of Macro, BlackRock Investment Institute

Opening frame: What’s driving markets? Market take

Camera frame

The U.S. has sharply escalated its trade protectionism. What matters is how long elevated tariffs last, any retaliation and the impact on growth, inflation and companies, in our view

Title slide: Finding a path through near-term volatility

1: Sweeping U.S. tariffs

A new 10% tariff has been announced for most U.S. imports, alongside higher duties across dozens of countries including China and the European Union.

Canada and Mexico have been spared new levies for now.

2: A bigger drag on growth

We think these tariffs add up to a U.S. average effective tariff rate of 20-25% – levels not seen for at least a century.

That is above the 10% landing zone we had expected, meaning a bigger drag on growth and more inflation over the next two years.

If tariffs stay fixed at the rates announced, we think U.S. stagflation and a global recession cannot be ruled out.

3: More volatility ahead

Potential retaliation on trade, legal challenges, selective rollbacks in coming weeks and markets adjusting to news point to more volatility ahead. More pressure on U.S. risk assets is likely before we see trade policy uncertainty start to dissipate in the near term.

Yet we see a path for U.S. equities to resume their global leadership over our six- to 12-month tactical horizon.

Outro: Here’s our Market take

Our base case is for sluggish U.S. growth and sticky inflation, not recession. We will be watching the Q1 corporate earnings season to see how companies plan to adapt to tariffs. This environment favors taking an active approach with portfolios, in our view.

We stay neutral emerging market equities and think the U.S. tariff impact will differ by region. We stay underweight long-term U.S. Treasuries given the challenging fiscal and inflation outlook.

Closing frame: Read details: blackrock.com/weekly-commentary

General disclosure: This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of April 2025 and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks.

In the U.S. and Canada, this material is intended for public distribution. In the European Economic Area (EEA): this is Issued by BlackRock (Netherlands) B.V. is authorised and regulated by the Netherlands Authority for the Financial Markets. Registered office Amstelplein 1, 1096 HA, Amsterdam, Tel: 020 – 549 5200, Tel: 31-20-549-5200. Trade Register No. 17068311 For your protection telephone calls are usually recorded. In the UK and Non-European Economic Area (EEA) countries: this is Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock. In Italy, for information on investor rights and how to raise complaints please go to https://www.blackrock.com/corporate/compliance/investor-right available in Italian. In Switzerland, for qualified investors in Switzerland: This document is marketing material. Until 31 December 2021, this document shall be exclusively made available to, and directed at, qualified investors as defined in the Swiss Collective Investment Schemes Act of 23 June 2006 (CISA), as amended. From 1 January 2022, this document shall be exclusively made available to, and directed at, qualified investors as defined in Article 10 (3) of the CISA of 23 June 2006, as amended, at the exclusion of qualified investors with an opting-out pursuant to Art. 5 (1) of the Swiss Federal Act on Financial Services (FinSA). For information on art. 8 / 9 Financial Services Act (FinSA) and on your client segmentation under art. 4 FinSA, please see the following website: www.blackrock.com/finsa. For investors in Israel: BlackRock Investment Management (UK) Limited is not licensed under Israel’s Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law), nor does it carry insurance thereunder. In South Africa, please be advised that BlackRock Investment Management (UK) Limited is an authorized financial services provider with the South African Financial Services Board, FSP No. 43288. In the DIFC this material can be distributed in and from the Dubai International Financial Centre (DIFC) by BlackRock Advisors (UK) Limited — Dubai Branch which is regulated by the Dubai Financial Services Authority (DFSA). This material is only directed at 'Professional Clients’ and no other person should rely upon the information contained within it. Blackrock Advisors (UK) Limited - Dubai Branch is a DIFC Foreign Recognised Company registered with the DIFC Registrar of Companies (DIFC Registered Number 546), with its office at Unit 06/07, Level 1, Al Fattan Currency House, DIFC, PO Box 506661, Dubai, UAE, and is regulated by the DFSA to engage in the regulated activities of ‘Advising on Financial Products’ and ‘Arranging Deals in Investments’ in or from the DIFC, both of which are limited to units in a collective investment fund (DFSA Reference Number F000738). In the Kingdom of Saudi Arabia, issued in the Kingdom of Saudi Arabia (KSA) by BlackRock Saudi Arabia (BSA), authorised and regulated by the Capital Market Authority (CMA), License No. 18-192-30. Registered under the laws of KSA. Registered office: 7976 Salim Ibn Abi Bakr Shaikan St, 2223 West Umm Al Hamam District Riyadh, 12329 Riyadh, Kingdom of Saudi Arabia, Tel: +966 11 838 3600. CR No, 1010479419. The information contained within is intended strictly for Sophisticated Investors as defined in the CMA Implementing Regulations. Neither the CMA or any other authority or regulator located in KSA has approved this information. In the United Arab Emirates this material is only intended for -natural Qualified Investor as defined by the Securities and Commodities Authority (SCA) Chairman Decision No. 3/R.M. of 2017 concerning Promoting and Introducing Regulations. Neither the DFSA or any other authority or regulator located in the GCC or MENA region has approved this information. In the State of Kuwait, those who meet the description of a Professional Client as defined under the Kuwait Capital Markets Law and its Executive Bylaws. In the Sultanate of Oman, to sophisticated institutions who have experience in investing in local and international securities, are financially solvent and have knowledge of the risks associated with investing in securities. In Qatar, for distribution with pre-selected institutional investors or high net worth investors. In the Kingdom of Bahrain, to Central Bank of Bahrain (CBB) Category 1 or Category 2 licensed investment firms, CBB licensed banks or those who would meet the description of an Expert Investor or Accredited Investors as defined in the CBB Rulebook. The information contained in this document, does not constitute and should not be construed as an offer of, invitation, inducement or proposal to make an offer for, recommendation to apply for or an opinion or guidance on a financial product, service and/or strategy. In Singapore, this is issued by BlackRock (Singapore) Limited (Co. registration no. 200010143N). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. In Hong Kong, this material is issued by BlackRock Asset Management North Asia Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. In South Korea, this material is for distribution to the Qualified Professional Investors (as defined in the Financial Investment Services and Capital Market Act and its sub-regulations). In Taiwan, independently operated by BlackRock Investment Management (Taiwan) Limited. Address: 28F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan. Tel: (02)23261600. In Japan, this is issued by BlackRock Japan. Co., Ltd. (Financial Instruments Business Operator: The Kanto Regional Financial Bureau. License No375, Association Memberships: Japan Investment Advisers Association, The Investment Trusts Association, Japan, Japan Securities Dealers Association, Type II Financial Instruments Firms Association) for Institutional Investors only. All strategies or products BLK Japan offer through the discretionary investment contracts or through investment trust funds do not guarantee the principal amount invested. The risks and costs of each strategy or product we offer cannot be indicated here because the financial instruments in which they are invested vary each strategy or product. In Australia, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFSL 230 523 (BIMAL). The material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. In New Zealand, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230 523 (BIMAL) for the exclusive use of the recipient, who warrants by receipt of this material that they are a wholesale client as defined under the New Zealand Financial Advisers Act 2008. Refer to BIMAL’s Financial Services Guide on its website for more information. BIMAL is not licensed by a New Zealand regulator to provide ‘Financial Advice Service’ ‘Investment manager under an FMC offer’ or ‘Keeping, investing, administering, or managing money, securities, or investment portfolios on behalf of other persons’. BIMAL’s registration on the New Zealand register of financial service providers does not mean that BIMAL is subject to active regulation or oversight by a New Zealand regulator. In China, this material may not be distributed to individuals resident in the People’s Republic of China (PRC, for such purposes, excluding Hong Kong, Macau and Taiwan) or entities registered in the PRC unless such parties have received all the required PRC government approvals to participate in any investment or receive any investment advisory or investment management services. For Other APAC Countries, this material is issued for Institutional Investors only (or professional/sophisticated /qualified investors, as such term may apply in local jurisdictions). In Latin America, no securities regulator within Latin America has confirmed the accuracy of any information contained herein. The provision of investment management and investment advisory services is a regulated activity in Mexico thus is subject to strict rules. For more information on the Investment Advisory Services offered by BlackRock Mexico please refer to the Investment Services Guide available at www.blackrock.com/mx

©2025 BlackRock, Inc. All Rights Reserved. BLACKROCK is a trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

BIIM0425U/M-4378214

Sweeping U.S. tariffs are set to push average tariffs to historic highs. Near term, we think this will lower growth and stoke higher inflation.

We see more market volatility ahead - before elevated trade policy uncertainty eventually fades.

We see a path for U.S. equities to resume their global leadership. We stay underweight U.S. Treasuries.

The U.S. has sharply escalated its trade protectionism. A new 10% tariff has been announced for most U.S. imports, alongside higher duties across dozens of countries including China and the European Union – due to come into effect over the next week. Canada and Mexico have been spared new levies for now. The key? How long these elevated tariffs last, any retaliation and the impact on growth, inflation and companies.

The dust is still settling on the details, with various interpretations on the amounts involved. We think they add up to a U.S. average effective tariff rate of 20-25% – a level not seen for at least a century. That is the ceiling for where it will ultimately settle, in our view. But we think negotiations between the U.S. and other countries will eventually bring it down. We had expected a 10% landing zone but now think it could be higher. If much higher, the drag on growth and boost to inflation over the next two years could be sizeable. If tariffs stay fixed at the rates announced, we think U.S. stagflation and a global recession cannot be ruled out.

Also key is how long historically high U.S. policy uncertainty persists – the longer it does, the greater the potential damage to economic activity. We think trade policy uncertainty will peak in the next couple of months, with retaliation, legal challenges or selective rollbacks potentially ahead – and market adjustments to incoming news.

That points to more volatility to come – and ongoing near-term pressure on U.S. equities and risk assets. Yet we see a path for U.S. equities to resume their global leadership over our six-to-12-month tactical horizon. We think trade policy uncertainty will dissipate and other potential policy positives could come to the fore, including a continuation of the 2017 tax cuts and deregulation. Even if sentiment is weakening, we still see solid U.S. corporate and economic fundamentals, though the odds of hard-landing scenarios have risen. Our base case? Slower growth and sticky inflation, not recession. We will be watching the Q1 corporate earnings season to see how companies plan to adapt to tariffs. Assessing the sector impact will be key and highlights why this environment favors taking an active and dynamic approach with portfolios, in our view.

We stay neutral emerging market equities and think the U.S. tariff impact will differ by region: we see Latin America holding up better than Asia. We lean against market pricing of nearly four Federal Reserve quarter-point rate cuts this year: U.S. core inflation is tracking well above the Fed’s 2% target, even before this round of tariffs. We stay underweight long-term U.S. Treasuries given the challenging fiscal and inflation outlook and like quality credit for income. We prefer gold as a portfolio diversifier.

Download the PDF report Download the PDF report

Stay ahead of markets with the latest insights from the BlackRock Investment Institute

Please try again
First Name *
Last Name *
Email *
Investor type *
Location *
Company *
*Required information | Read our Privacy policy
Thank you
Thank you for your subscription!
We usually publish weekly insights on every Monday. Expect to receive your first newsletter from us this upcoming Monday.