Our Portfolio Managers Weigh Impact of Trump’s Tariffs

Markets were already on edge, and sweeping new tariffs from President Trump have added another level of complexity. To help investors make sense of the implications, we asked our portfolio managers two key questions:

1. How do the new tariffs impact your asset class?
2. What indicators should investors be watching?

Their answers offer timely perspective on this shifting environment and provide valuable context to help investors cut through the noise. As the situation evolves, we’ll keep this blog updated with fresh insights from our portfolio managers.

• Digital Assets: De-dollarization Shifts Bitcoin Towards Monetary Role
• Gold: Safe Haven Demand Rises and Miners’ Margins Are Key
• Natural Resources: Sector Readies Response Playbook
• Commodities: Weaker Dollar May Shift Tides After Demand Shock
• Emerging Markets Bonds: Spreads Pressured, EM Currencies Steady
• Emerging Markets Equity: Short-Term Challenges May Accelerate Structural Trends
• Fixed Income: Spreads Widen as Confidence Indicators Flash
• Municipal Bonds: As Costs Pressure Projects, Timing and Pricing Matter

Digital Assets: De-dollarization Moves Bitcoin Towards Monetary Role

Matthew Sigel

Head of Digital Assets Research

Impact

The Trump administration’s April 2 tariff package—targeting imports from China and the EU—has reignited global trade tensions and increased the risk of monetary and geopolitical fragmentation. Bitcoin initially dipped from $85k to the $81K range after the announcement and sold off further over the weekend, but has still outperformed the Nasdaq across every major timeframe—1 week, 1 month, YTD, and over the past 1, 2, 3, 5, and 10 years. While slower growth alone isn’t bullish for Bitcoin, the policy response might be: if tariffs weigh on GDP without triggering a fresh inflation spike, the Fed may have scope to cut rates—reintroducing the liquidity conditions under which Bitcoin has historically excelled. At the same time, the weaponization of trade and financial infrastructure continues to drive interest in neutral settlement rails.

That interest is no longer theoretical. China and Russia have reportedly begun settling some energy transactions in Bitcoin and other digital assets. Bolivia has announced plans to import electricity using crypto. And French energy utility EDF is exploring whether it can mine Bitcoin with surplus electricity currently exported to Germany. These are early signs that Bitcoin is evolving from a speculative asset into a functional monetary tool—particularly in economies looking to bypass the dollar and reduce exposure to U.S.-led financial systems.

Indicators to Watch

Investors should watch the evolving path of Fed policy: dovish shifts in rate expectations and rising liquidity are historically positive for Bitcoin. The U.S. Dollar Index (DXY) remains a key signal—any sustained dollar weakness may bolster the Bitcoin-as-hedge narrative, particularly in an environment of geopolitical fragmentation. Importantly, while 10-year Treasury yields surged on Monday, Bitcoin’s reaction was notably subdued. Unlike in 2022, rising yields did not trigger a wave of forced liquidations or volatility in crypto markets, suggesting that BTC may be decoupling from old macro sensitivities. Bitcoin ETP flows and on-chain activity also matter: despite recent volatility, U.S.-listed spot Bitcoin ETPs are still net positive by ~$600 million year-to-date, with renewed inflows in late March. Finally, watch for retaliatory moves from China or the EU—especially those aimed at bypassing dollar-based systems—which could accelerate adoption of crypto as an alternative settlement layer.

Explore more Digital Assets Insights.

Gold: Safe Haven Demand Rises and Miners’ Margins Are Key

Imaru Casanova

Portfolio Manager, Gold and Precious Metals

Impact

Gold and gold stocks should ultimately benefit from the heightened level of risk across the global economy and global financial system. The unpredictability of economic policies and heightened market volatility should boost gold's appeal as the preferred safe-haven asset during times of global uncertainty. This should support a shift in investor sentiment towards gold and related equities.

Gold stocks’ leverage to the gold price, combined with their attractive valuations relative to the broader equity markets, and their low correlation with most other asset classes, should lead to a re-rating of the sector as investors look for a safer place to rotate capital to and as they look to diversify their portfolios.

Indicators to Watch

For the gold miners, investors should be focused on margins, assessing the impact of the ongoing trade war on global currencies and inflation trends for the sector. A weaker local currency leads to lower USD costs and improves margins for the miners. Gold miners were estimating cost inflation would average about 3-5% in 2025, prior to the recent tariff related developments.

Explore more Gold Insights.

Natural Resources: Sector Readies Response Playbook

Shawn Reynolds

Portfolio Manager, Global Resources

Impact

Needless to say, the current tariff landscape is highly variable, complex and far from certain. Threats of further steps against China and their response ratchet up the intensity. Nevertheless, there is more clarity today than during February and March, even if it is still a blurry sight and worse than feared. However, given the severe reaction of global markets to tariff risks, we feel a large portion of the downside has been priced.

Undoubtedly, the biggest factor facing the entire natural resource sector is the current sentiment that a trade war will lead to a prolonged and deep global recession. In particular, the U.S. relationship with China has escalated and an off-ramp may take time and appear difficult to construct. Under that scenario, commodity demand of all of the main sectors covered by our Global Resources Strategy—energy (traditional and transitional), metals and mining and agriculture/paper/forest products—would suffer.

However, we believe the reality of application of “reciprocal” tariffs, as well as “retaliatory” tariffs will not be as disruptive as the worst fears. The broad-based 10% tariff influences the price of most commodities well within their recent ranges and is something to which the global economy historically has had a rather benign reaction relative to current perceptions. Additionally, geopolitical events over the last several years have reoriented and made supple commodity supply chains. The energy, metals and agricultural industries have adapted adroitly, and we believe these ecosystems will continuously evolve to newly optimal patterns. A good example of this is the 34% tit-for-tat tariffs on energy (mostly liquefied natural gas (LNG)) between China and the U.S. In our view, global LNG trade will adapt. We view that the delivery patterns of Russian, Iranian and Venezuelan crude oil has comfortably adjusted. In sum, most commodity producers have seen a version of this movie before and have a playbook for how to react.

Nevertheless, the net impact of recessionary fears have overwhelmed any moderation in the tangible impact of tariffs and uncertainty has spiked.

Indicators to Watch

As suggested above, the key factor to watch for our industries is how demand evolves—particularly in China. Most economists are now predicting a recession that should lead to an erosion of demand. But we would also watch several other macro factors including:

• How credit markets ultimately react to this.
• How quickly (or if) negotiations of tariffs settle and with whom.
• Stimulus measures announced by major economies such as China or the EU.
• The announcement of supportive positives for the U.S., including deregulation, tax relief, Federal Reserve easing and revamped fiscal spending.

Explore more Natural Resources Insights.

Commodities: Weaker Dollar May Shift Tides After Demand Shock

Roland Morris

Portfolio Manager, Commodity Index Strategy

Impact

Very simple, commodities fell sharply because demand expectations collapsed. Most commodity indexes were close to all-time highs on April 2. The UBS Constant Maturity Commodity Total Return Index fell 6% in the following two days, a large move for a broad-based index. Copper, the commodity with a “PhD in economics”, declined 14% in two days after making new all-time highs in late March.

These tariffs are much higher and worse than expected. The outlook for global growth has collapsed. Gold has held up better than most commodity sectors but has pulled back about 4% from the new all-time highs reached on April 2. I believe that Trump’s global tariff war is very bullish gold.

Indicators to Watch

The dollar. I think that this trade war is very bearish the dollar in the longer term. If I am correct, commodities should be supported and could resume a bullish trend.

Explore more Commodities Insights.

Emerging Markets Bonds: Spreads Pressured, EM Currencies Steady

Eric Fine

Portfolio Manager, Head of Active Emerging Markets Debt

Impact

Tariffs and their associated recession risks are having three main effects on emerging market bonds.

1. The “easy” one: spreads should widen on dollar-denominated bonds. Credit spreads are extremely correlated in risk-off moments like this, and long credit (from investment grade to high yield) has been the most consensus view, for arguably decades. We’d also note that corporate bonds can get incredibly illiquid and that this risk is almost always un-priced, further pressuring spreads higher.
2. Risk-free yield curves should rally. This means Treasuries, as well as the risk-free yield curves of emerging market local-currency bonds (which were actually up on the year until April 4).
3. Emerging market currencies have been resilient, only cracking recently when U.S. stocks deepened their declines. EM local currency is incredibly under-owned, which explains their strength this year (despite the selloff in recent days). They also have higher real rates and are often net creditors in dollars, so have FX intervention power. Also CNY has been kept unchanged by the Chinese authorities, anchoring EM currencies.

Indicators to Watch

CNY: watch the daily fix. If it stays largely unchanged (versus the daily model predictions), China is remaining a stabilizing force for emerging markets.

China stimulus: it’s the logical pressure on China, which was already moving in that direction.

The U.S. Federal Reserve: a dovish tilt could mark a turn in trend.

Also, watch the big asset prices combos for the U.S. In particular, if U.S. stocks are down and Treasuries are down, that’s very bad, as that indicates an exit from anything other than cash. If U.S. stocks are down and Treasuries are down and the USD is down, that’s very, very bad, as that is an exit even from cash and the U.S. system.

Explore more Emerging Markets Bonds Insights.

Emerging Markets Equity: Short-Term Challenges May Accelerate Structural Trends

Ola El-Shawarby, CFA

Portfolio Manager, Emerging Markets Equity

Impact

The U.S. administration’s proposed reciprocal tariff framework adds a new layer of complexity to the global trade outlook, particularly for export-oriented economies. However, rather than derailing momentum, it may accelerate structural trends already reshaping emerging markets—such as the shift toward domestic demand, innovation-led growth and supply chain diversification.

While tariffs pose short-term challenges for China, they reinforce the country’s strategic pivot toward consumption, high-value manufacturing and technological innovation—including advances in AI and next-generation industries—supported by targeted policy measures. India remains relatively insulated, with growth anchored by robust internal demand and ongoing reform. In Europe, the risk of trade disruption is being met with growing support for coordinated fiscal expansion.

With U.S. exceptionalism increasingly in question, the potential for a weaker dollar and lower rates reduces external pressures on emerging markets. That said, equity market volatility is likely to persist amid uncertain global growth and shifting policy dynamics. In this environment, selectivity is key—we remain focused on resilient, domestically driven businesses with strong fundamentals and clear exposure to long-term structural tailwinds.

Indicators to Watch

Several macro forces are shaping the outlook for emerging markets, and investors should stay focused on a few key areas:

• Trade and policy dynamics: The broadening scope of U.S. tariffs raises the risk of retaliatory measures and further supply chain disruption, which could weigh on global trade and sentiment.
• Inflation and interest rates: Trade-driven cost pressures may complicate the inflation outlook. However, a more dovish U.S. Federal Reserve—having paused its tightening cycle—supports the case for rate cuts, improving liquidity and easing pressure on EM currencies.
• U.S. dollar trajectory: A weaker dollar would provide a meaningful tailwind for EMs by reducing external funding costs and supporting commodity-linked revenues.
• Structural shifts: Ongoing trends such as nearshoring, supply chain diversification, and rising investment in domestic capacity remain central to EM growth stories.
• Country-level fundamentals: In a more volatile and uncertain global environment, markets with sound external balances, credible policy frameworks, and scope for targeted stimulus are best positioned to navigate near-term risks and sustain long-term outperformance.

While short-term volatility is likely to persist, these indicators offer a useful lens through which to assess both risks and opportunities across the EM landscape.

Explore more Emerging Markets Equity Insights.

Fixed Income: Spreads Widen as Confidence Indicators Flash

Fran Rodilosso

Head of Fixed Income ETF Portfolio Management

Impact

The newly introduced tariff regime equates to lower growth expectations, at best, and a higher risk of recession both in the U.S. and abroad as a bad, but not even worst, case. Slower growth and/or greater recession odds lead to higher credit spreads, and this impact is being felt across all risky debt markets, including investment grade credit, high yield, loans, CLOs and emerging markets debt.

There were many other market reactions in the couple of days following “liberation day” that are consistent with the rapid move wider in credit spreads, such as the rally in risk-free rates, the fall in commodity prices and, of course, equities entering bear market territory. We find all of these moves consistent with slower growth, lower earnings and—if there is not a rapid reversal in the tariff policies—multiple contraction. What is extremely interesting, and should be of some additional concern, however, is the bond market selloff on Monday, April 7. A correlated selloff with equities may show additional loss of confidence in the U.S. administration’s overall economic plan and its ability to manage through the multiple challenges of elevated prices, high and rapidly growing debt and economic uncertainty that the administration itself has created.

Indicators to Watch

In the credit space, we will be watching a variety of indicators:

• The new issue market as an indicator of the health of capital markets.
• Fund flows as a sign of investor sentiment and market technical.
• Default rates in the high yield bond and leveraged loan markets as an indicator of financial stress, although these will take longer to develop.
• Lastly, of course, the performance of the U.S. dollar and Treasuries as indicators of market confidence in the U.S. economy and U.S. institutions.

As always, we are looking for other signs of stress that could potentially lead to credit market dislocations, such as funding market disruptions and wholesale unwinding of leveraged positioning. So far, we have seen no such cracks emerge.

Explore more Income Investing Insights.

Municipal Bonds: As Costs Pressure Projects, Timing and Pricing Matter

Tamara Lowin

Senior Municipal Credit Analyst

Impact

The cost of construction projects across all sectors will increase as tariffs raise the price of materials sourced internationally. Some projects will be shelved, but we expect to see a combination of strained financials as projects are completed over budget and increased revenue streams to close funding gaps—whether higher tolls, tuition costs, rent, healthcare services and/or other fees. Replacing aging infrastructure, from bridges to potholed roads, will be fiscally more difficult to justify. Expansion projects will also likely be stalled without increases in revenue streams, and areas could find themselves with insufficient resources, such as hospital beds and transit.

Public borrowers without expansion or replacement plans will also feel additional strain due to operational supplies and employee costs. Healthcare providers especially have already seen an increase in general supply costs, many sourced from overseas, and in addition, have attempted to address the U.S. shortage of nursing staff with international hiring, which will become more difficult, further squeezing margins and closing more beds.

Sales and use tax revenues are likely to remain within range due to increasing base prices balanced by lower anticipated tourism and domestic demand. Entities directly involved in international trade—such as ports, airports, energy and the state and local governments that depend on the revenue, economic activity and jobs from those facilities—will see strain from higher unemployment (lower income taxes and high unemployment costs) and lower revenue.

Indicators to Watch

Understanding the timing and any guaranteed pricing for existing construction projects as well as realistic pricing projections for future plans will be important to evaluate the feasibility of their success. The liquidity cushion of borrowers as well as revenue elasticity will also be a necessary factor to understand their pricing power. The economic drivers of local and state governments, both their industries (e.g. healthcare, construction, finance and tourism), and their revenue streams such as sales tax or income tax will give us color on the timing and magnitude of declines in revenue and feasibility of current operation and capital plans.

Explore more Municipal Bonds Insights.

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