Research from the University of Sussex indicates President Trump's tariff war may lead to monthly economic losses of approximately $31 billion as foreign investors choose to keep their capital domestically. Analysis reveals that geopolitical events and tariffs have historically prompted a trend of reduced overseas investments in American equities. The US economy is particularly vulnerable due to its reliance on foreign investments. If tariffs persist, anticipated reductions in foreign equity investments could pose significant financial risks over the next two years.
Donald Trump's tariffs are all about trying to cut the country's trade deficit, but any gains made here are likely to be wiped out by losses in international investments in the short-to-medium term.
The obsession with exports has led to a blind spot over how deeply the US relies on investments from other countries. American bonds and equities have been seen as a safe haven for the entire post-war era.
The study reports that losses could amount to at least $31 billion in monthly foreign equity investment on average for the next two years if the trade war continues.
Recent data shows that US gross equity inflows from equities purchased by foreign residents were close to $750bn in 2023 but the research suggests this will fall fast if tariffs continue.
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