On Saturday, U.S. President Donald Trump revealed new tariffs on China, Canada, and Mexico, sparking fresh concerns about a potential trade war. This development has raised doubts about the global economic outlook, as experts in Miami weighed in on the far-reaching implications of these trade barriers.
Miami-based industry experts agree that while tariffs pose serious risks to the global economy, they dismiss the notion that they will lead to significant inflation. According to them, the main consequence of tariffs is retaliation, which could trigger a global trade war, ultimately harming economic growth and complicating market dynamics.
However, they also note that while no country truly benefits from a trade war, the U.S. may have a slight edge due to its focus on strengthening domestic markets.
Trade War and U.S. Market Advantage
Alberto Bernal, Global Strategy Director at XP Investments, points out that President Trump’s “zero-sum” view of international trade, which prioritizes U.S. interests, could backfire on a global scale.
Despite his protectionist stance, Trump has pushed for policies that benefit U.S. financial markets, such as tax cuts, deregulation, and promoting mergers and acquisitions. These measures can drive U.S. stock market growth, indirectly benefiting Latin American investors with stakes in U.S. assets.
Experts agree that trade wars generally lead to market volatility, reduced global growth, and more challenges for international businesses. While the U.S. might face some setbacks, it’s expected to fare better than other countries, especially in comparison to emerging markets.
Miami experts: Challenges for Emerging Economies
Fernando Marengo, Chief Economist at BlackToro Global Investments, warns that U.S. tariffs on Mexico and Canada could undermine decades of global economic progress. Since 1950, global trade has thrived on specialization and globalization, benefiting countries by allowing them to focus on their competitive advantages. However, the tariffs threaten to disrupt this system, leading to unfavorable conditions for emerging markets.
Marengo also emphasizes that these tariffs could shift capital flows toward the U.S., drawing investment away from emerging markets and Latin America. The U.S. dollar’s strength and the weakness of other currencies will make it harder for emerging economies to attract investment, further complicating the outlook.
Investment Strategy Amid Uncertainty
Both experts agree that the current economic environment is volatile. Marengo suggests that investors may adjust portfolios to reduce exposure to both equities and fixed-income securities, focusing on short-term returns. With the risk of rising inflation and continued trade war tensions, alternative assets like gold could become attractive, though their value will fluctuate based on fiscal policy and trade developments.
While the market initially reacted negatively, talks between the U.S., Mexico, and Canada delayed the full implementation of the tariffs, offering a brief respite. The future remains uncertain as trade tensions continue to evolve.
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