6 June 2025

Jonathan Sparks

Chief Investment Officer, UK, HSBC Global Private Banking and Premier Wealth

In the first few months of this year, every new tariff headline felt like a bolt from the blue. Looking back, “peak tariff” was reached on “Liberation Day”, April 2. At this point, the US was set to enact tariffs on a seismic and global scale. Chaos spread across markets as analysts weighed up the impact on economic growth of each twist and turn in tariff announcements. Uncertainty on tariffs were driving markets and everything else took a backseat.

Is this still the case or are markets beginning to normalise? On the face of it, that seems to be the case: equities are less volatile, and prices have rebounded, with many stocks trading at higher levels than before April. Pulling together each announcement is no easy feat as several countries and industries have come under Trump’s spotlight. In the table below we attempt to boil down the more major announcements on tariffs. If we look at a case-by-case basis for each announcement, there is a visible fall in the magnitude of equities moves following another tariff announcement, whether seen as a positive or negative. To an extent, the market has become de-sensitised to news on tariffs.

Source: Bloomberg, HSBC

This comes as no surprise now that markets have come to the conclusion that Trump is rattled by the impact of tariffs on the US bond market and business sentiment. High government borrowing cost alongside a worsening growth outlook does not create a good backdrop for The One Big Beautiful Bill that is heading toward the Senate. The Congressional Budget Office reckons this spending bill could add $2.4tn to the budget deficit over the next decade, while US borrowing costs are already uncomfortably high.

As a result, markets have calmed and focused more on the economic data, which could have been a lot worse. While some surveys, such as the ISM Services PMI, point to a flatline, others have rebounded, while the easing volatility will help support the broader economy. The last thing Trump needs is a trade war sending US Treasury yields soaring. Technology sector news is once again catching the attention of investors. The announcement that Meta has signed a nuclear energy deal is a reminder that they are powering ahead with AI, looking for means to power their data centres. This is why, in our recent Q3 Perspectives, we stressed the need to prioritise the impact of AI adoption on your investments.

We therefore continue to take a constructive approach on US markets and have once again focused on the opportunities in equities. Could politics take the lead again? Absolutely. After all, there is a risk that when the 90-day tariff extension runs out in just over a month, Trump will once again shock markets with higher tariffs. Yet, this seems unlikely, and investors do not seem overly stressed about this risk. Perhaps there is some complacency, but the recent direction of travel on tariffs indicates that this calmer mindset is warranted. That’s why we continue to stay invested but manage the risks. How? By diversifying in other markets we like, such as emerging Asia; or safer assets, such as UK gilts or gold.