By Alfredo Piacentini – Managing Partner, DECALIA SA
Another article about Donald Trump, you say? It’s hard to talk about anything else when the wave is so powerful—at times even terrifying.
Indeed, the world now finds itself in the hands of a remarkable communicator, with a clear penchant for demagoguery and a tendency to approach every issue as a negotiation. His economic skills, however, are weak, and his policy reversals frequent.
As financial observers, we find it impossible to predict the market scenario over the coming months—or even days. Prudence is therefore necessary in portfolio allocation, with a higher-than-usual level of liquidity.
Even though stress levels have eased somewhat since Easter, the financial markets have experienced a historically difficult start to April, in the wake of the now-infamous “Liberation Day.”
A Crisis of Confidence
The U.S. tariffs announced by Donald Trump on April 2 not only caused global equity indices to drop by more than 10%, but also triggered high volatility in interest rates, exchange rates, commodities, and credit markets.
We have to go back to events like the 2008 financial crisis or the COVID outbreak in March 2020 to find similar panic-driven movements—this time exacerbated by a retreat in liquidity.
Unlike those events, this is not due to a financial crisis or pandemic, but a crisis of confidence in Donald Trump, his administration, and the United States as a whole.
On the trade front, even more damaging than the sharp increase in tariffs (which was later suspended for 90 days for all countries except China) was the simplistic and arbitrary calculation method used. It further discredited the American president and his entourage.
Financially, April also saw a controversy regarding the potential dismissal of Federal Reserve Chair Jerome Powell, calling into question the independence of the U.S. central bank.
These questions will come into sharper focus when Powell’s term officially ends in May 2026, with Trump expected to appoint his successor. Depending on the personality selected, the consequences for the U.S. dollar could be dramatic.
It’s worth noting that sovereign debt of the magnitude seen in the U.S. only becomes a true problem if—or when—the credibility of the governing institutions is undermined.
Geopolitically, uncertainty also surrounds the intentions of Trump’s team of “apprentice sorcerers,” starting with the fate of Ukraine.
In such circumstances, a cautious, wait-and-see investment stance appears appropriate. The risks of a global recession—or worse, stagflation—cannot be ruled out, with the potential for substantial market losses and increased volatility.
Will tariff negotiations escalate into a full-blown trade war? What about the many collateral effects on trust and financial conditions, whose ultimate impact on corporate earnings growth is difficult to measure?
The U.S. Has Most to Lose
Our base economic scenario does not currently forecast a global recession. Even if the April 2 tariffs are implemented—raising the average duty to 18% of U.S. imports (up from 2.5% at the end of 2024), roughly equivalent to levels during the interwar U.S. protectionist era—it is the U.S. that would be hit hardest.
We estimate the impact at -1.0% to -1.5% on GDP growth and +1.0% to +1.5% on inflation. The rest of the world would also see lower growth expectations (–0.3% to –0.5% for partners like China or Europe), but with relatively limited inflationary effects.
What’s clear is that a new paradigm has taken hold over the past 100 days, with the onset of de-globalization and U.S. disengagement, whose outcome is difficult—if not impossible—to predict. Paradoxically, this de-globalization is fulfilling the wildest dreams of Trump’s critics, especially environmentalists and advocates of degrowth.
The U.S. dollar has already lost 10% of its value against the Swiss franc, hitting its lowest level in 25 years. If the U.S. truly loses its global primacy, this trend could continue. While current equity prices already reflect some uncertainty, they remain vulnerable to the constant flow of news.
It therefore seems wise to hold extra liquidity, pay close attention to hidden risks, and focus on the quality of underlying assets. In other words, now is the time for risk management—not speculative adventures.