Trade wars are disrupting the global economy, potentially causing profit recessions from rising costs and lower demand. Investors should focus on European fixed income, diversify equities, and use gold for stability

Key points

  • Our simulations indicate that tariffs could negatively impact economic growth by 0.2-0.3% and increase inflation by approximately 0.3% in both imposing and affected countries.
     

  • The size, timing, and sequence of these measures are key to understanding their impact, with the strategy likely targeting specific sectors and products rather than broad measures.
     

  • China is likely to implement fiscal support measures to shift production chains to Asia and Latin America, reducing US imports and mitigating tariff effects In contrast, Europe lacks this flexibility but could accelerate reforms and investments.

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