The countdown is on for the US "reciprocal tariffs” policy. Slated to set in on April 2nd, these tariffs aim to reduce trade discrepancies between the US and its trading partners. The exact details haven’t been worked out yet, not least because the president also wants levies to reflect “non-tariff barriers” – like difficulties in accessing markets or restrictions on certain imports. But broadly, the US will shoot to even out trade deficits, plus a fee matching the trading partner’s Value Added Tax (VAT).

Not only are the final levies still to be decided, but the US has said it’s open to negotiation. Some trading partners, like India, have already suggested that they’ll strike an agreement with the States to avoid higher rates, and more will likely follow.

The effect on trade and, in turn, the US economy and global stock markets will depend on how broad these reciprocal tariffs are – namely, the number of countries and products impacted. But remember, uncertainty can be worse than knowing: investors want predictable earnings and cash flows in order to value stocks accurately – so until they have those figures, share prices will probably err on the erratic side.

The Federal Reserve said last week that tariffs’ impact on inflation may only be transitory, lasting for just one year and levelling out afterward. Many said the inflation that spawned from the pandemic would be transitory – then they were forced to raise interest rates from 0% to between 5.25% and 5.50%, the biggest rise in 40 years. As we know, those rates still haven’t concretely tamed runaway prices.

The president has hinted that tariffs could increase over time. The outlook for US stocks was already in doubt, so if you think this news will only cloud it further, you may want to consider diversifying your portfolio across sectors, geographies, and assets to reduce the impact of any fallout.