By Victor Reklaitis, MarketWatch
Worries are persisting this month about a potential global trade war, helped by news that the Trump administration is gearing up to impose tariffs on at least $50 billion of Chinese goods.
That news tied to the world’s second-biggest economy comes after President Donald Trump earlier this month moved ahead with tariffs on steel and aluminum imports, though he exempted a number of trading partners.
In any case, what should investors worried about a trade war do?
Mark Haefele, the global chief investment officer for UBS Wealth Management, has offered this game plan in a 55-word sentence that came at the end of a three-page note:
“Investors who wish to protect their portfolios against the risk case of a full-scale trade war should ensure they are not overexposed to export-oriented equity regions (Germany, Japan) or sectors (machinery, car manufacturing), and ensure adequate global diversification, including assets in the U.S., where some sectors could benefit directly from the tariffs (e.g. steel manufacturers).”
“A major global trade war is a risk, but unlikely, and there is enough positive news on the global economy to keep us overweight global equities,” Haefele also said in the note dated March 12, meaning his shop recommends tilting portfolios toward stocks.
“Overall, the potential risk from an escalation in trade frictions is another reminder of the benefits of maintaining a well-diversified investment portfolio,” Haefele added.
During last month’s selloff for global stocks, Haefele said markets had been “overdue” for a pullback, but the drop had become “overdone.”
How we got here: A history of U.S. steel wars before Trump
President Trump is considering imposing steep tariffs on foreign steel and aluminum, sparking fears of a trade war with China and other nations. But he is not the first U.S. President to impose tariffs and quotas on foreign steel.
This story was first published on March 14, 2018.