It is arguable whether these moves can force China to make policy changes, Rothman says. “If the U.S. had gotten together with Europe and Japan and worked together to impose tariffs, it would have affected a bigger share of their market and put more pressure on China. But President Trump is also fighting with Europe and Japan, so they are not going to cooperate.”
Jamie Dimon, CEO of J.P. Morgan, has been outspoken in his belief that the United States should be presenting a united front with Europe and Japan if it wants to influence China.
Jean-Claude Juncker, president of the European Commission, a policy institution of the European Union, was in Washington at the end of July to try to persuade President Trump to de-escalate the trade wars with U.S. allies. So far, the effort has yielded few results.
“Most advisors are only beginning to deal with this and many have not even started these conversations with clients about the impact of tariffs on their portfolios, because it changes day to day and hour to hour,” says Sponheimer.
However, clients are beginning to ask questions, says Dennis Nolte, vice president and financial advisor at Seacoast Investment Services in Winter Park, Fla. “Tariffs mean higher prices and inflation. The housing and automobile numbers are reflecting lower sales already.”
“One of the first things to consider for a financial advisor is how tariffs and resulting volatility are going to affect short-term results of portfolios,” says Mark Henry, founder and CEO of Alloy Wealth Management based in Charlotte, N.C. “Tariffs, while they may only have a short-term impact on markets, may cause enough volatility to affect clients’ long-term strategies.”
The tariffs “are already affecting input costs,” says Jason Brady, CEO and president of Thornburg Investment Management. That effect can be seen in the earnings results of car makers, he says. And the need to anticipate new tariffs poses a significant barrier to business planning.
“In theory, technology is less affected, particularly in a more services-oriented realm,” Brady adds. “But we’re seeing the trade tensions actually have effects on large tech names. NXP-Qualcomm is one example, and the growing importance of tech to everyday life in both China and the U.S., as well as the rest of the developed world, puts companies such as Alphabet, Apple, Alibaba and Tencent in the spotlight.”
He’s referring to a deal by American chipmaker Qualcomm to buy its Dutch counterpart NXP that fell through in July because China refused to give the merger the regulatory approval that would have been needed for the company to operate in China. Authorities blamed the failure to gain regulatory approval on the escalating tensions between the United States and China.
Overall, the economy is doing well and could do even better next year while the dollar continues to strengthen, particularly in the face of the slow growing economies of Europe, which have been much more sluggish in coming back from the recession. “The only flies in the ointment are the trade disputes with Canada, Mexico, the EU and China,” says Ben Ayers, senior economist at Nationwide Financial Services Inc. in Columbus, Ohio. “It is adding uncertainty to the markets, and if we see even more of a trade war, it will add stagflation and a little downside risk to the markets.