Has the "Trump Trade" become the "Trump Trap"?

The market has had its third consecutive week of losses and is now lower than when President Trump was elected in November, as investors grow weary of the uncertainty surrounding President Trump's new policies. This volatility has sent shockwaves through Wall Street and beyond, leaving investors and analysts scrambling to understand and adapt to the rapidly changing economic landscape.

So, what happens when the “Trump Trade” becomes the “Trump Trap”? More importantly, will it continue, and what can you do about it?

The Catalyst: Trump's Trade Policies

At the heart of this market turmoil lies President Trump's implementation of sweeping tariffs on imports from key U.S. trading partners. The administration has imposed a 25% tariff on goods from Canada and Mexico, along with a 20% levy on Chinese imports. These aggressive trade measures have sent ripples through the global economy, sparking fears of a potential trade war, which has economic consequences.

Investor Concerns and Economic Implications

The market's negative reaction stems from several key concerns:

• Inflation Fears: The tariffs are expected to increase the cost of imported goods, potentially leading to higher prices for consumers and businesses alike. This inflationary pressure could erode purchasing power and impact economic growth.
• Global Business Impact: Many U.S. companies have extensive international operations or rely heavily on global supply chains. The new tariffs threaten to disrupt these business models, potentially affecting profitability and growth prospects.
• Retaliatory Measures: There are growing concerns that affected countries may respond with their own tariffs on U.S. goods, further escalating trade tensions and potentially harming U.S. exporters.
• Economic Uncertainty: The unpredictability of the administration's economic approach has left investors wary. This uncertainty makes it challenging for businesses to plan for the future and for investors to make informed decisions.

Sector-Specific Impacts

While the market downturn has been broad-based, certain sectors have been hit particularly hard:

• Technology: The tech sector, which had been a driving force behind much of the market's recent gains, has experienced significant losses. This sector's global nature makes it especially vulnerable to trade tensions and economic uncertainty.
• Manufacturing: Companies in the manufacturing sector, particularly those reliant on steel and aluminium imports, have seen their stock prices decline as investors weigh the potential impact of increased input costs.
• Agriculture: With the threat of retaliatory tariffs looming, agricultural companies and commodity prices have also faced downward pressure. Australian agriculture companies could benefit from a trade war between two of our biggest agricultural trading partners.

It’s been an incredible run in the U.S. stock market, with the highest level of international investment in U.S. stocks in history, justified by outsized returns in the MAG7. Now, with the MAG7 trade overcrowded and priced to perfection, investors need to look elsewhere.

Opportunities

Gold

Central banks are gobbling up gold like it's going out of style, and with interest rates potentially dropping, gold is looking even more attractive. The U.S. debt spiral and uncertainty around a potential trade war will push people towards the safety of gold.

• Gold has already smashed records in early 2025, cruising past $2,900.
• Central banks are hoarding gold like squirrels before winter.
• Lower interest rates could make gold shine even brighter.

Gold miners are historically cheaper than physical gold – our picks are Northern Star (ASX: NST) and Newmont (ASX: NEM, NYSE: NEM).

Asian Markets: Not a Second-Rate Silicon Valley Anymore

Now, let's hop over to the Asian stock market. After 2–3 years of negativity, there are some seriously undervalued stocks just waiting to be snatched up.

Additionally, DeepSeek has really shown that China’s “Silicon Valley” is no second-rate San Francisco – they are cutting edge, and investors are starting to notice. Meanwhile, Japanese companies have cash… and lots of it. There’s no better place to hide in a market fall.

• ASX: CETF China A50 ETF
• Betashares Asia Technology Tigers ETF 
• ASX: HJPN Currency hedged Japan ETF

Final thoughts

Remember, investing is a marathon, not a sprint and saving money is just as valuable making money. So take your time, be patient, do your research, and may the market odds be ever in your favour!