1. Tariffs: President-elect Donald Trump has indicated he will impose new tariffs on three of America’s leading trading partners. He plans to sign an executive order placing 25% tariffs on goods imported from Canada and Mexico on day one of his presidency, with an additional 10% on goods from China. This is on top of earlier plans for 60% tariffs on China and 10%-20% on all other imports to the United States.

2. Inflation: Researchers at Harvard University1 have analyzed the impact of increased tariffs during the president-elect’s first term, concluding American importers and, to a lesser extent, consumers, paid for the tariffs. In the case of specific tariffs on washing machines imported from Asia, their research shows prices of domestically manufactured machines also rose, as did the selling prices of tumble dryers, which did not carry specific tariffs. However, the tariffs did encourage Asian manufacturers to set up factories in the United States and created over 2,000 jobs. With even higher tariffs proposed in the president-elect’s second term, the potential impact on US inflation could give investors pause for thought.

3. Political turbulence in South Korea: President Yoon’s declaration of martial law and the subsequent swift vote to reverse the decree by parliamentarians indicates the checks and balances in South Korea’s democracy are working well. Policymakers were quick to respond with unlimited liquidity, if required, to stabilise financial markets. In the short term, equity market volatility could increase given political uncertainty, as well as concerns over president elect Trump imposing 10%-20% tariffs on all imports, including those from South Korea. In our assessment, the medium- to long-term outlook for the market remains unchanged.

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