In May, the European stock market rose by 4.8%, continuing its upward trend since mid-April. Similarly, U.S. stocks traded in euros also saw gains, with the S&P 500 up by 6.4% and the Nasdaq climbing 9.7%.
Following the major announcement of U.S. tariffs in early April and their subsequent postponement for 90 days, May saw the first successful negotiations take place. The United Kingdom kicked things off with a framework agreement on May 7. China quickly reached an agreement that led the United States to reduce its tariffs from 145% to 30%, just days after the higher rates were announced. This was a significant step towards de-escalation. Then, as negotiations with the European Union seemed to be stalling, Trump applied his usual pressure on the European Commission by threatening an almost immediate 50% increase in tariffs. Ursula von der Leyen quickly secured a postponement of the originally scheduled date to early July.
Amidst all the announcements, counter-announcements, and changes, there is, paradoxically, gradual clarity for those who can read between the lines. It seems quite certain that, for various reasons, everyone will be subject to a minimum rate of 10%. On the other hand, China will face a maximum rate of 30%. The final rate for each country will be set between these two limits and will depend on the current trade deficit as well as each country’s willingness to support the policies and geopolitical stance of the Trump administration. We expect the EU to face a rate of around 15% since it exports a significant amount to the United States, particularly Irish pharmaceuticals, as well as German cars and machine tools. However, we don’t anticipate it being higher than that, as the EU remains a key geopolitical ally of America.
Once we acknowledge this observation, it becomes clearer why the market seems to be reacting less and less to the fluctuations of Trump’s trade war. After a significant drop that reflected a genuine concern about uncertainty in early April, each step taken to alleviate that uncertainty has helped to restore confidence in the market. Some witty minds have even coined a nickname for the current atmosphere: the “TACO Trade,” which stands for “Trump Always Chickens Out.” This is because the president seems to consistently backtrack on his threats, acting like a “chicken.” No matter how one chooses to interpret things, it seems clear to us that there’s no need to panic every time the White House makes a statement.
One big question remains: what will be the actual impact of these tariffs on American consumers and the economy as a whole? Trade statistics show that companies imported a large amount of foreign products into the U.S. between November and January, anticipating the arrival of the tariffs. As a result, they have significant stockpiles to sell at “pre-tariff” prices, which should delay price increases in stores for a few months. It seems that the full impact won’t be felt until 2026. This might give consumers enough time to adjust and allow the economy to recover.
The Clartan equity funds saw growth in May, with the Valeurs fund rising by 5.8%, Europe by 4.6%, and Ethos by 5.3%. The Patrimoine fund increased by 0.8%, Flexible by 2.3%, and Multimanagers by 4.1%.