Opportunity in Trump’s tariffs? – 3 fund ideas that could benefit

On 2 April US President Trump announced sweeping tariffs across its trading partners.

The UK got away relatively lightly with ‘just’ 10% tariffs, while the EU faces 20% tariffs and Japan and China 24% and 34% respectively.

Markets didn’t respond well, with most of the major markets opening down.

Back in November we wrote our outlook for 2025 and highlighted that President Trump would mean volatility for markets. The themes we highlighted at the start of the year remain relevant and in some ways are now even more compelling given the heightened volatility in markets.

It’s quite likely that the tariffs announced on 2 April are more of a starting point for negotiations than the final deal. Any deals done from here could help to calm markets.

On the other hand, many US trading partners (including the EU) are now talking about retaliatory tariffs. That could lead to further bouts of market ups and downs.

Even in the best-case scenario that tariffs are lowered a bit from the initial levels announced, they’re likely to have a negative impact on growth.

They could also push up inflation in the US as importers try to pass on price rises.

Both these things could lead to further market wobbles.

Though difficult to navigate, it’s worth remembering that volatility isn’t always a negative. It can create opportunities, and there will always be winners as well as losers.

As always with investing, these should be part of a portfolio that’s well diversified across different regions and types of investments, like shares, bonds and commodities.

It’s also important to remember that timing markets is notoriously difficult.

For long-term investors, while shorter-term volatility in markets can be very uncomfortable, often the best course of action is to sit tight and ride it out.

Here are three themes we see opportunity in, along with three fund ideas to consider.

This isn’t personal advice. Remember all investments and any income they produce can fall as well as rise in value, so you could get back less than you invested. Yields are also variable, and no income is ever guaranteed. Past performance also isn’t a guide to future returns. Tax rules can change, and benefits depend on individual circumstances. If you’re not sure an investment is right for you, ask for financial advice.

Bonds

We’re bullish on bonds. Given the uncertainty in markets, and the potential for tariffs to increase inflation, rate cuts are likely to be slower than expected.

But with the 10-year gilt and US Treasury yields both still above 4%, bonds are still as attractive to us as they were at the start of the year.

Taking a long-term view, we think yields could lower to below 4% in future – of course nothing is guaranteed though.

By looking at bonds now, there’s potential for capital gains in the future, as well as being rewarded with inflation-beating income in the near term, and the potential to diversify portfolios.

US smaller companies

We think the 47^th US President’s impact on the US stock market could be positive for smaller companies.

Trade tariffs favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused, though investing in them carries more risk.

Trump has also proposed cuts to corporate taxes, which is positive for companies’ earnings – and therefore could be beneficial for stocks.

Personal taxes, including income tax, are also expected to be lower under a Trump administration, which could boost consumption and raise economic activity – again good for domestically-focused smaller companies.

Smaller companies might be more susceptible to market volatility than their larger counterparts though, so this isn’t a trade for the faint-hearted, or those with shorter investment horizons.

Year to date, US smaller companies have been caught up in the wider market volatility and have performed worse than their larger counterparts on the whole. Once tariffs are in place, however, we think the more positive story could start to come through.

Gold

In times of uncertainty, one investment which tends to do well is gold.

This is because it often acts as a ‘safe haven’.

In the first three months of 2025 gold rose by 14.70%. While we wouldn’t necessarily expect returns to continue at this pace, the uncertain outlook, combined with increased buying from central banks, particularly in emerging markets, means that the commodity could well continue to enjoy support. As always though, past performance isn’t a guide to the future.

3 fund ideas

Looking for some fund ideas to fit with these themes? Here are some suggestions.

Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

For more details on each fund and its risks, use the links to their factsheets and key investor information.