How have US trade relations with its major partners changed?

According to UBS, trade relations between the US and most of its major partners have improved recently, reducing the threat of a tit-for-tat tariff conflict.

Home / Business and Economy / Trade Tensions Ease, Equity Rally Continues Amid Lingering Risks

Trade Tensions Ease, Equity Rally Continues Amid Lingering Risks

Q: What is the impact of tariffs on the US economy?

UBS estimates the tariffs will trim US GDP growth by about 1 percentage point and raise inflation by a similar margin, though they don't expect it to cause a recession or end the equity rally.

Q: What opportunities does UBS see for investors?

UBS recommends investors use market volatility to add equity exposure, highlighting opportunities in "transformational innovation themes, including AI, Power and resources, and Longevity."

30 Aug

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Summary

US reaches tariff agreements with EU and Japan
Talks with China ongoing, risk of retaliation averted
Tariffs expected to trim US GDP growth by 1 percentage point

Trade Tensions Ease, Equity Rally Continues Amid Lingering Risks

As of August 30th, 2025, trade relations between the United States and its major partners have improved, offering some relief to markets. According to UBS analysts, the US has reached agreements with the European Union and Japan that cap tariffs on most goods entering the country at 15%, half the rate threatened earlier.

Negotiations with China are still ongoing, as President Trump extended the talks by another 90 days. UBS noted that the risk of an "economic destruction cycle of retaliation" between the US and its peers appears to have been averted.

However, the analysts warned that tariff-related uncertainty persists. They estimate the levies will trim US GDP growth by about 1 percentage point and raise inflation by a similar margin. UBS also flagged risks from punitive duties imposed on Switzerland, India, and Brazil, as well as possible sector-specific tariffs on pharmaceuticals and semiconductors.

India has been hit particularly hard, with goods facing duties of up to 50%. Despite the lingering challenges, UBS expects the effective US tariff rate to settle near 15%, which they believe "shouldn't be enough to cause a recession or end the equity rally." The firm recommends investors use market volatility to add equity exposure, highlighting opportunities in "transformational innovation themes, including AI, Power and resources, and Longevity."

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