Rates are back … bigger and better than ever
In 2025, the US introduced the most important trade policy in decades, with average rates that increase from around 2.4 percent in January to around 18-20 percent in August, levels that have not been seen since the 1930s.
In some cases, the tasks on Chinese input have exceeded 50 percent, which marks a sharp departure of the stable global trade arrangements of the past decades.
This week, on August 11, 2025, the US President signed an executive order that the implementation of the highly increased rates for Chinese goods postponed for 90 days, which extended the current trade display until mid -November. The move – only announced a few hours before new measures had to come into effect – holds existing rates in place (about 30 percent on Chinese import and 10 percent on American exports to China) but pauses further escalation. As they are susceptible, markets welcomed the delay, with Asian shares that rally and American indices showed selective profits.
History does not look friendly at rates
What has not been changed is that these rates evoke comparisons with the 1930 Smoot-Hawley Tariff Act, which has worsened great depression by reducing global trade by two-thirds. Although today’s world economy is more interconnected and has greater policy tools at its disposal, the speed and scope of the measures of 2025 are introducing risks that are not yet fully wrinkled through supply chains, business income and broader economic growth.
Current effects
Rates for American car -import, clothing and selected consumer goods have already translated into higher prices -vehicles have risen an estimated 12-14 percent, clothing has risen almost 38 percent in some categories and fresh products rise by around seven percent.
As we have reported earlier, the Yale budget lab estimates that the measures of 2025 will increase US consumer prices by 1.8 percent, equal to US $ 2,300 per year for the average household.
For companies, it is expected that higher input costs and disturbed supply chains are eroding margins. And retribution of important trading partners – including China, the EU and Canada – focuses on politics and economically sensitive industries, from agricultural exports to advanced production components.
Although the financial markets are expected to respond with increased volatility, markets are almost all time. This is understandable when one realizes that a slowing economy usually encourages central banks to inject liquidity and lower rates. What they have done in total all over the world. In the meantime, JP Morgan has reduced the growth govers from the Gross Domestic Product (GDP) for Q4 2025 from 2.1 percent to 1.4 percent, with the US already booking three percent in the second quarter of three percent.
Buffett and important risks for investors
The postponement of 90 days (or ‘Taco’ Trump chickens always out) is a temporary delay, not a resolution. Rate policy can quickly re-escalate and introduce sharp fluctuations in equity, currency and raw material markets. In the meantime, American companies with a high import content or export restaurants can see margin compression and profit reductions if the rates persist or expand. And this happens at a time when market valuations are stretched.
And don’t forget Warren Buffett, when he explains why he now has more T-Bills than the Federal Reserve (US $ 314 billion versus US $ 195 billion and the position of Double Berkshire Hathaway a year earlier), said Hathaway shareholders, “Every now and then you come across something … We will be flooded with opportunities where we are grateful that we have the money.”.
With rates that still have to feed through supply chains, disturbances for complex global production networks can still cause shortages, delays and cost inflation in sectors from electronics to cars. At the same time, retaliation measures and reduced trade flows can weigh on GDP growth, which influences cyclical sectors and smaller companies that cannot cover the extra imposts.
Although shares have shown resilience, a tactical decision that is worth considering is your allocation to private credit, cash and other liquid alternatives to cash with reasonable revenues. Maintaining liquidity in view of policy uncertainty can be a powerful option, so that you can benefit from any market disk locations.
Cash as an option above lower prices becomes an even more mandatory proposition if one takes into account the unpredictability and possibly destructive effects of Trump’s still too announced foreign and domestic policy statements.
Roger Montgomery is the founder and chairman of Montgomery Investment Management. Roger has more than three decades of experience in fund management and related activities, including stock analysis, stock and derivative strategy, trade and effects. Prior to the establishment of Montgomery, Roger positions in Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also the author of the best -selling investment guide for the stock market, value. Aabel-Hoe to appreciate the best shares and buy them for less than they are worth.
Roger regularly appears on television and radio, and in the press, including ABC Radio and TV, the Australian and Ausbiz. View upcoming media performances.
This message was contributed by a representative of Montgomery Investment Management PTY Limited (AFL No. 354564). The main purpose of this message is to provide factual information and not to provide financial product advice. Moreover, the information provided is not intended to give a recommendation or opinion about a financial product. However, each comments and opinion of opinion can only contain general advice that has been drawn up without taking into account your personal objectives, financial circumstances or needs. Therefore, before acting on the basis of one of the information provided, you must consider the suitability in the light of your personal objectives, financial circumstances and needs and you must consider requesting independent advice from a financial adviser if necessary before you make decisions. This message excludes specific personal advice.
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