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Investing.com -- UBS analysts warned in a note Wednesday that tariff concerns could become the next major risk catalyst for markets following Monday’s DeepSeek-driven AI sell-off.
“With a measure of calm returning to the tech sector on Tuesday, we think tariff concerns may yet come back to the fore,” the firm wrote.
UBS noted that initially, markets had reacted positively to President Trump’s first wave of executive orders, as they lacked “Day One” punitive tariffs.
However, new reports indicate that the administration may take a more aggressive stance. The Financial Times reported that US Treasury Secretary Scott Bessent is advocating for universal tariffs starting at 2.5%, increasing monthly to as high as 20%.
The bank added that Trump himself signaled a preference for an even sharper approach, stating plans to impose tariffs on computer chips, medicine, and metal imports “to bring production back to our country.”
UBS sees growing risks for Europe and China, despite Trump’s recent diplomatic tone with Beijing.
While he seeks China’s cooperation on a Russia-Ukraine settlement, a hawkish wing in his administration and bipartisan anti-China sentiment in Congress could push for tougher trade measures, says the bank.
They also state that in Europe, long-standing trade imbalances and Digital Services Taxes on US firms could make the region a target for new tariffs.
UBS also notes that Trump’s recent trade standoff with Colombia—where threats of punitive tariffs quickly forced Bogotá to back down—could signal a broader “strong-arm strategy” toward other US trading partners.
The firm adds that “free trade agreements with the US are no shield against tariff threats,” citing Trump’s ability to enact tariffs under the International Emergency Economic Powers Act.
Despite these risks, UBS maintains a positive outlook for US equities, forecasting “around 9% upside for US stocks over the balance of 2025” due to strong economic growth, AI tailwinds, and falling yields.