Learn more about market trends Angry societies – Multipolar world

Angry societies – Multipolar world

March 2019

The frustration of the Western middle class and the populist ideas it fuels continue to make headlines. In France, for instance, the yellow vests are continuing to protest. In the UK, the outcome of Brexit remains highly uncertain, and in the European Union, opinion polls indicate that Eurosceptic parties may gain seats in the European parliamentary elections in May 2019.

More trade disputes

The increase in the number of global trade disputes is another case in point. According to the World Trade Organization, 137 new trade-restrictive measures were introduced between October 2017 and 2018, affecting USD 588.3 bn of trade. This is a seven-fold increase from the year-ago period.

Increase in number of trade-restrictive measures

Source: WTO Secretariat, Credit Suisse

Auto tariffs a new threat

On the trade front, however, negotiations between the USA and China appear to be making progress. In late February, President Trump delayed a further increase in tariffs thanks to substantial progress made on topics such as intellectual property protection, agriculture and currencies. However, a final agreement has yet to be reached. At the same time, the risk that the USA might impose import tariffs on cars has increased after the US Department of Commerce completed an investigation into the effects of automobile and automobile part imports on national security. Faced with the threat of such tariffs, the European Commission has said it would respond to tariffs with retaliatory measures, for instance by reducing soybean imports.

EM consumer stocks, national champions as beneficiaries

The uncertainty over soft-mercantilist measures such as tariffs remains a negative for companies. Indeed, companies highlighted this uncertainty as they published annual results in recent weeks. While the progress in the US-China trade negotiations is a positive catalyst for equities, particularly for emerging market consumer stocks, we continue to like fundamentally strong national champions and brands – strategic companies that have a strong relationship with governments and/or strong global brands – as they are well positioned to achieve solid growth even against the backdrop of trade measures.

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