What do Trump’s tariffs mean for investors?

If it’s up to Donald Trump, Wednesday, April 2, 2025, will go down in American history as Liberation Day. On that day, he announced a 10% import tariff on nearly all foreign goods. Key trading partners like the EU, China, and Japan are facing even higher tariffs. But what does this mean for investors? We called Thijs Knaap (Chief Economist at APG) and Charles Kalshoven (Expert Strategist at APG) to discuss.

How have the markets reacted so far?
Kalshoven: "Despite the serious announcements coming out of Washington, the market reaction has been relatively mild so far. Stock markets in Asia and Europe dropped by about 1.5% to 3%. The U.S. market also opened about 3% lower on Thursday. Meanwhile, the U.S. and German 10-year bond yields fell by roughly 5 to 10 basis points following ‘The Great Tariff Show.’ That’s not an insignificant move, but it’s hardly dramatic either. So far, the reaction has followed a fairly classic pattern: stocks down, bonds up. You could argue that the direction of the market response suggests a negative economic impact, but the magnitude of the reaction doesn’t exactly signal a recession."

What else stands out in the markets?
Kalshoven: "We had already seen international container shipping rates declining in recent weeks. This may indicate that physical trade flows are starting to come under pressure following months of stockpiling. Major publicly traded shipping companies like Maersk saw their share prices plummet by as much as 10% after Liberation Day. Investors clearly anticipate that shipping companies will suffer from restrictions on international trade. But overall, it seems that investors believe the situation won’t be as severe as initially feared."

What about the dollar?
Knaap: "It’s behaving strangely. Typically, when tariffs are introduced, you’d expect the dollar to strengthen. The relative price shifts that result from tariffs tend to reduce the global supply of dollars, which would push its value up. A strong dollar, in turn, offsets some of the impact of tariffs on the trade balance. In the past, we’ve also seen a ‘safe haven’ effect, where the dollar strengthens even when the U.S. itself is the source of economic uncertainty. The fact that the dollar is weakening this time suggests something different is at play. The uncertainty isn’t just economic—it’s also political and institutional. What good are U.S. dollars if the current administration, one way or another, can obstruct access to your assets or undermine their value? Investors seem to be turning to alternative safe havens, such as gold and the currencies of democracies with institutions perceived as more reliable, like Japan and the eurozone."

What can we expect in the coming months?
Knaap: "The big question, of course, is whether the market is right and this will all blow over. A lukewarm market response might actually encourage Trump to push forward with his policies. However, it’s unlikely that this mild reaction will continue if the announced measures are fully implemented. Another open question is whether Trump will even care about falling stock prices. His voter base doesn’t have widespread stock ownership. Plus, he’s not eligible for re-election—unless he manages to reshape institutions in his favor to allow a third term.

What we do know for sure is that if these tariffs move forward as planned, global economic growth will take a major hit. Given how deeply interconnected the global economy is, this would be a seismic shock. Multinational companies would have to write off massive losses on their supply chains, and some might even collapse. If it comes to that, the correction in the S&P 500 we’ve seen so far this year will be just the beginning. Whether the trade war leads to stagflation or deflation will depend on the response of fiscal and monetary authorities. In simple terms, tariffs drive up costs and typically lead to stagflation. But if they cause enough damage and uncertainty to crush demand, we could see deflation instead—that’s what happened in the 1930s. To end on a more positive note: we shouldn’t rule out the possibility that the Trump era ultimately ushers in a new period of international cooperation."