U.S. Import Tariffs Could Change Under Trump Administration, Investors Favoring Foreign Stocks, According to Macquarie

According to a strategist at Macquarie, belief is growing that President-elect Donald Trump will adopt a transactional approach to U.S. import tariffs. In a note released on Tuesday, Macquarie indicated that this perspective has been reflected in recent trading sessions, with investors favoring foreign stocks over U.S. equities.

This shift in focus may be due to a recent rise in U.S. Treasury yields, which has prompted some investors to question the high valuations of U.S. stock indices and look elsewhere, Macquarie noted. Another possible factor could be a report from the Wall Street Journal about a flexible U.S. import tariff policy. While Trump denied the report, labeling it as "fake news," it nonetheless resonated with many investors.

The notable weakness of the U.S. dollar observed in yesterday's session continued into today’s trading. This suggests that investors are not entirely convinced by Trump’s denial and are open to the possibility of a more moderate international policy agenda under his administration.

The Macquarie strategist believes that the likelihood of Trump being truly transactional is high. The strategist suggests that Trump would prefer to extract concessions from U.S. allies rather than impose sanctions on them, viewing these concessions as a political victory for him in the U.S.

However, the strategist anticipates that there may be less room for a transactional approach with China, where punitive tariffs are to be expected instead. This is attributed to China's perception as a strategic competitor, if not a threat, to the U.S.