Trump's tariffs tests the stock markets

Trump announced on April 2 that he will expand his tariff demands with more countries and higher rates. PFA's chief strategist provides an overview of the proposal and PFA's assessment of future prospects here. PFA's recommendation remains that customers should stay true to their investment choices and leave ongoing risk management to PFA. As the corona crisis also showed, keeping a cool head is often the best cure for stock panic.

The article has been updated on April 7, at 14:00.

Which product groups and countries will be covered by the new tariffs announced by Trump on April 2?
Initially, the US's imports from all countries will be subject to a minimum tariff of 10 percent, which will take effect on April 5. Only Canada and Mexico are currently exempt, and imports from these countries will be taxed according to the trade agreement Trump made with them during his first presidential term.

In addition to the minimum tariff, an individual retaliatory tariff will be imposed based on the size of the US's trade deficit with individual countries. This will take effect on April 9. For the euro area, this means that the total tariff will be 20 percent, while for several Asian countries, it will be over 40 percent. Certain goods are currently exempt from the retaliatory tariffs, including copper, medicine, and microchips.

How have the reactions been in the stock markets? Globally and in Denmark?
The size and scope of the tariffs were worse than feared and were subsequently followed by a retaliatory reaction from China, which imposed a 34 percent tariff on American goods. The trade war has therefore sent global stock markets into the red. The European Stoxx50 index is currently down by 11 percent, while the American S&P500 stock index is down by 9 percent. In Denmark, the OMX C25 has fallen by just over 12 percent.

At the same time, investors are seeking safe havens in government bonds, which has sent interest rates down to the lowest level since the beginning of March, when Germany announced its large fiscal investment package of approximately 500 billion euros.

It is expected that the EU will respond with a coordinated countermeasure. What is planned
The EU has so far remained cautious but signaled that it is ready for a countermeasure. On April 13, the EU is expected to impose additional tariffs on a range of American products in response to Trump's tariffs on steel and aluminum. However, it appears that the EU will try to negotiate with the US before these tariffs are imposed. Trump has previously threatened even higher tariffs if other countries retaliate, so it could get worse before it gets better.

Tariffs are often described as a 'tax on consumption' since tariffs typically mean more expensive goods. Can you say something about who will be affected and what it means for growth expectations?
The new tariffs will weigh down activity among all exporters and thus negatively impact growth in Europe as well as Asia and the rest of the world. The US will also be affected as the prices of imported goods are expected to take a significant jump upward, thereby weakening purchasing power and private consumption.

At the same time, we have already seen that the trade war has increased uncertainty and created concerns about the future of global supply chains, which is bad for activity.

The higher-than-expected tariffs mean that the market must again downgrade expectations for global growth and upgrade expectations for inflation.

What is PFA doing to protect its customers from the negative consequences that a more extensive trade war can bring?
The increasing uncertainty has made us reduce our equity risk in general. Additionally, we have adjusted some levers in the short term. Specifically, we have sold American stocks and reduced our exposure to the dollar. We have done this to protect our customers' pension savings in a time when there is so much uncertainty coming from the US.

That said, it is important to remember that pension is long-term savings. The declines that have occurred should therefore also be seen in light of the fact that a typical PFA customer has received solid double-digit returns in both 2023 and 2024. This is also evident when we look at the last five years. Here, a typical customer can look forward to returns of over 45 percent despite the negative development in 2025. Although stocks have fallen in 2025, the gains from the past many years are far from eaten away. In the long term, we therefore stick to our overall investment strategy, where we have distributed the 700 billion DKK we manage for Danes across a wide range of assets: stocks, bonds, real estate, wind farms, forests, and much more.

How does PFA view the near future - and what is the recommendation for you as a customer?
Right now, political uncertainty remains high, and therefore it may get worse before it gets better. However, it should also be said that it is primarily a political crisis we are facing, and the global economy is fundamentally in good shape. If more conciliatory tones come from the political side, the development can therefore turn and take a more positive direction. It is clear that China's reaction with retaliatory tariffs has not improved the outlook, but other countries have struck more conciliatory tones, and this can help mitigate the negative development.

Regardless of what happens in the short term, PFA's recommendation is that customers remain true to their investment choices and let PFA handle ongoing risk management. For example, if we look at the corona crisis, which hit us a few years ago, it showed that the customers who followed this recommendation were also the ones who got back on track the fastest when the development turned. In fact, it only took 6 months before stocks set new records after falling by 34 percent.