First U.S.–China tariffs take effect, growth fears build

With the first tranche effective, supply chains reassessed sourcing and pricing power. Business sentiment softened and capex plans were deferred in exposed sectors such as machinery, autos, and semis. Equity volatility rose as investors modeled second‑round effects and potential escalation paths, including broader product lists and higher rates.

FX and rates reflected a mild risk‑off tone as the dollar bid and term premia eased. Commodity markets saw softer demand signals, particularly in industrial metals. Equity factor rotations favored quality balance sheets and domestic defensives over high operating leverage exporters as uncertainty extended planning horizons.

We expected targeted fiscal and monetary offsets in some economies, but coordination challenges limited immediate relief. Earnings guidance trended cautious, and analysts cut estimates for global manufacturers. We monitored early supply diversification to Southeast Asia and near‑shoring narratives in North America and Europe.

We reduced exposure to trade‑sensitive cyclicals, added to utilities and staples, and maintained optional hedges. In credit we rotated up in quality and shortened spread duration. Portfolios held incremental cash to deploy into discrete resolution headlines or valuation dislocations created by tariff step‑ups.