25 April 2025: Weekly Report – Trade Tensions, Dollar Weakness and Economic Risks

While both the US and China have now taken some steps to limit tariffs escalating further - such as China exempting certain US goods from tariffs and the US exempting some Chinese products - there is little evidence of any substantive progress or even engagement on reaching a comprehensive trade agreement.

Furthermore, confidence outside of equity markets is lacking. Neither the oil price or the US dollar have recovered from their declines this year. Although a short-term rebound is possible due to recent overselling, the dollar remains overvalued and faces longer-term challenges to its status from within the US itself - specifically, the risk of eroding its institutional quality, fiscal sustainability, and central bank independence.

Whilst a high degree of uncertainty faces the global economy and a near-term crisis is not expected (as true crises never are), risks are skewed to the downside and much depends on unpredictable policy developments. As a result we continue to favour a selective, broadly diversified stance across the T. Bailey portfolios and are minded to take opportunities to reduce risk.