United States Agreement-EU: What consequences?

The United States and the EU have reached an agreement on customs duties. Consequently, Now, what should we expect? Consequently, Decryption. Additionally, Consequently,

The agreement provides for customs duties of 15% on most European Union exports (EU) to the United States. Similarly, half less than the 30% that the US administration had threatened to impose if no agreement was concluded before 1^is august.

According to President Trump. Moreover, the EU is said to have committed, as part of this agreement, to buy for $ 750 billion in American energy, to invest $ 600 billion in the United States (in addition to existing investments) and to acquire “large amounts” of American military equipment.

The specific details have not yet been disclosed. For example, questions remain as to the united states agreement-eu: what consequences? feasibility and the mechanisms of purchases, investment agreements and interaction between the rate of 15% and potentially higher customs taxes which could be applied under section 232 (for example pharmaceutical products). In addition, But anyway. Therefore, the trade agreement will probably be considered positive in the short term for economies and for both European and American investors.

What is the context?

The S&P 500 has won almost 30% from its lower April. However, when the worries related to American trade policy were at their pinnacle. Therefore, This increase in the index reflects the conviction which has gradually established itself among investors that negotiations between the United States. Similarly, its main trade partners would eventually lead to agreements.

Trade agreements with the United Kingdom. Nevertheless, Japan and Indonesia, the customs break with China, and the relaxation of restrictions applying to artificial intelligence fleas (IA) have confirmed the market with this united states agreement-eu: what consequences? idea. Recent indicators also suggest that the American economy has resisted. The feeling of the market was also supported by the continuation of investments of technological giants in AI.

The agreement between the United States. the EU was considered one of the most difficult to conclude given the multiplicity of stakeholders within the EU, the many issues likely to weigh on discussions and the offensive rhetoric of recent months. Furthermore, The agreement should therefore be considered a major step towards the resolution of the trade conflict and. in the immediate future, the market should welcome it.

Accentuation of volatility in sight

However. with regard to its strong increase in recent weeks, the market seems to have already integrated a lot of good news and investors would do well to prepare for a possible accentuation of volatility in the coming weeks.

The market will undoubtedly appreciate the improvement of visibility united states agreement-eu: what consequences? on trade relations between the United States. the EU, but the fact remains that the level of American customs duties was practically multiplied by six compared to that which prevailed before the “day of the liberation”.

The effects of the increase in customs duties are beginning to feel in the American economy. the uncertainty continues to hover on the magnitude, the distribution of costs and the possible second round effects. In the days and weeks to come, the figures for employment, inflation and retail sales will be combed.

The importance of sectoral customs duties

In addition, discussions continue on sectoral customs duties which could be imposed under section 232. Visibility in this area remains low. it is difficult to say how such customs taxes will interact with the agreements concluded with the different countries, but the economic repercussions of sectoral customs rights could be heavier than those of general united states agreement-eu: what consequences? customs taxes.

Sector customs duties could be even greater if American justice did not recognize the American administration the power to impose customs taxes under the International Emergency Economic Powers Act. on which President Trump was based on the reciprocal customs duties announced on the “Liberation Day”, on April 2.

The possibility that the US administration will return to the trade agreements already concluded. that it continues to use customs duties as a negotiation tool can also be completely excluded.

How to invest?

• Prepare for market volatility

We count on an increase in the market in the next twelve months on a background. in particular, of better visibility on the front of customs duties. However. insofar as the markets have already achieved a beautiful journey and that they integrate a good part of the good news, they could undergo short -term volatility.

Investors whose exposure to actions united states agreement-eu: what consequences? already complies with their strategic objectives should consider short -term covers. Those who are under-exposed to actions should prepare to strengthen their positions by taking advantage of the possible market. folds in the coming weeks.

• Invest in processing innovation

Investors can take advantage of volatility to expose yourself to the themes of structural growth. in particular AI, energy and resources and longevity, which should generate great performances in the years to come. Regarding AI. a diversified exposure to infrastructure, semiconductors and applications should make it possible to take advantage of the growing adoption and monetization of this technology.

The theme of energy and resources should continue to be supported by the explosion of electricity demand. The theme of longevity is carried out by demographic evolution. rapid innovation in the fields of health, medical technologies and well-being.

• Buy quality bonds

Investment grade and high quality bonds present, united states agreement-eu: what consequences? no doubt, an attractive risk/yield profile. The yields remain relatively high. With regard to the weakness of the differences. the profile risks/yield of high -efficiency obligations and senior loans seems, however, less interesting.

In terms of duration. intermediate deadlines (five to seven years) will be favored given the risks of volatility accentuation on the long part of the curve.

• Manage political risks

Gold remains. certainly, an effective means of coverage against geopolitical and political uncertainties, including those hovering over the independence of the American federal reserve.

The search for UBS maintains its objective of 3500 dollars per ounce for yellow metal. without excluding higher prices in the event of risk intensification.

• Reduce excess exposure to the dollar

With regard to the high level of the budget deficit. the deficit of the current balance of the United States, and the current trend of international investors to reconsider united states agreement-eu: what consequences? their exposure to the greenback, we continue to count on a weakening of the dollar by the end of the year.

While the high level of American interest rates makes coverage of exposure to the dollar. investors should review their allocation to the various currencies and align it with their needs to deal with their expenses or their commitments.