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Investing.com -- US President Donald Trump has confirmed the implementation of a 25% tariff on imports from Canada and Mexico, effective from February 1. It remains uncertain if crude oil, a significant import from these countries, will be included in the tariff.
The tariff is aimed at addressing issues such as migration, fentanyl trafficking, and trade imbalances. However, Nigel Green, CEO of deVere Group, a global financial advisory and asset management firm, warns that the move carries significant risks for investors around the world.
The US imports approximately 40% of its crude oil, primarily from Canada. If oil is subjected to tariffs, it could impact energy markets, leading to increased costs for businesses and consumers. This could potentially drive inflation higher and undermine economic growth. Green suggests that the energy markets, already fragile due to global supply constraints, could face unnecessary volatility, making fuel and transportation more expensive globally.
The tariff announcement has also sparked uncertainty in trade policies, leading to potential market instability. With Canada and Mexico planning retaliation, global markets are preparing for possible turbulence. Investors with exposure to North American equities, currencies, and sectors dependent on supply chains may need to reassess their positions. Green advises investors to consider diversifying their portfolios to guard against increased volatility and possible trade disruptions. This could be achieved by increasing exposure to defensive sectors like healthcare, utilities, and consumer staples, as well as exploring alternative assets such as gold and real estate.
Certain industries are expected to feel the impact of these tariffs more than others. Manufacturing, automotive, and consumer goods sectors that rely on cross-border supply chains could face rising costs, potentially affecting profitability. Agriculture may also be impacted if retaliatory tariffs target US exports. Conversely, domestic energy producers, certain US-based manufacturers, and industries backed by protectionist policies could experience short-term gains due to reduced competition.
Green emphasizes the importance for global investors to closely monitor these developments, as escalating trade tensions could affect US equities and influence broader global asset allocation strategies. With the tariff deadlines approaching, he urges global investors to prepare for potential disruptions.
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