Are investors wise to ignore US tariff tensions?

Despite threats and recriminations from China and other global leaders, investors are actively choosing to ignore the trade tariff tensions, with global equity markets rising.

The G7 meeting next weekend is now expected to be the main showdown for the issue, with investors hoping that the US administration will backtrack on their current stance – but they might be disappointed.

The two main benchmarks President Trump appears to use to gauge the success of his policies are his grassroot supporters and the US equity market.

iShares Core S&P 500 ETF USD Acc (iShares Core S&P 500 ETF USD Acc (CSP1))

Source: interactive investor                Past performance is not a guide to future performance

His blue-collar followers are hugely supportive of tariffs, and with equity markets currently also choosing to dismiss the problem and in positive territory, this is reinforcing President Trump’s view that he is doing the right thing, making it less likely that he will back away from his current stance.

This chicken and egg position, where markets don’t believe that tariffs are a credible threat, combined with President Trump’s position that markets are not worried about the issue could lead to an unpleasant reality for both sides eventually.

However, for the moment, investors are benefitting from positive sentiment.

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