Global trade: Playing with the tipping point

UBS Global Risk Radar August 2019

30 Aug 2019

This series helps investors identify and assess global financial market risks and their investment implications

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At a glance.

  • Tensions between US and China have recently escalated once more following President Trump's decision to increase tariffs on US imports from China.
  • In our base case, we expect the latest round of tariffs to be implemented and estimate that this will take around 0.3ppt off US growth over the next 12 months. In our downside scenario, we see the risk of a US recession rising significantly as a result of additional US sanctions such as higher tariffs on sensitive goods from China or the imposition of duties on car imports.
  • While we still believe that a US recession is not imminent, risks are clearly tilted to the downside. We have recently trimmed our equity exposure, leaving us underweight to stocks overall. Instead, with rates likely to stay lower for longer, we look for income-enhancing opportunities.

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