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Financial Industry Insights from Advisors Asset Management
On March 02, 2018
Tariffs: Clarity, Not Chaos in the Numbers
The announcement of the implementation of tariffs on steel and aluminum has once again awakened investor anxiety. The implementation of a tariff on imports (25% on steel and 10% on aluminum) is very anemic in actual numbers, but that is not the reason the markets are reacting in a heightened risk-off manner. There is clarity in the numbers, but chaos in the reaction to the “what if’s.” Let’s do a quick review:
Perhaps the bigger surprise is that we are surprised at all. Since 2008, we have seen a ceiling of globalization as measured by the amount of global economic activity as a percentage of exports. In the Early 1980s the level of exports to global economic output was 38%, by 2008 this was at 60% and unchanged since. Since 2008 we have seen over 2,500 negative net tariffs implemented worldwide. The reaction by countries across the globe to The Great Recession (or the biggest and broadest bank run in history) was to silo and ring fence their countries. Some might argue the United States was a bit late to this game relative to the world.
As such, there are a few areas that are extremely important to allocating assets.
This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit www.aamlive.com.
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