Trump tariffs: time to flee to an investment safe haven?

Trump’s tariffs reignite trade tensions, rattling markets as investors seek safe investment havens

As of 13 March 2025, Donald Trump’s administration has reignited global trade tensions with sweeping tariff proposals, leaving investors nervous about falling markets and considering ‘safe haven’ alternatives.

During the presidential election campaign, Trump pledged 10-20% tariff on all imports to the US, with a staggering 60% levy targeting Chinese goods. Now in office, he’s confirmed 25% tariffs on steel and aluminium imports, and a range of other tariff threats still abound.

As a result, investment markets – both in the US and globally – have take fright. Laith Khalaf, head of investment analysis at AJ Bell, explains: “The mighty S&P 500 has taken a tumble and it’s the actions of the US president which look like the main cause. The US index dipped briefly into correction territory this week, defined as a 10% fall from a previous peak.

“Markets have taken fright at the global trade war which seems to be erupting, because that can be expected to dampen global growth while pushing up inflation. US stocks already looked vulnerable to correction unless everything turned out peachy, and the market is now looking at US trade policy and thinking peaches may turn out to be quite thin on the ground.”

The UK faces uncertainty as Trump hints at more tariffs to come, though he’s suggested a deal could spare Britain. The US accepts more than £60 billion of UK exports annually, from pharmaceuticals to cars according to 2023 Office for National Statistics (ONS) data.

But inflation and trade risks aside – UK investors will possibly be looking at their portfolios with concern as markets whipsaw and send numbers down. This could lead many to consider selling assets and looking for so-called ‘safe haven’ alternatives.

Ask our experts your money questions

Safe haven risks

For UK investors and pension holders, Trump’s tariffs spell volatility. Self-invested personal pensions (SIPPs) and global funds, often with high levels of US exposure, could see short-term dips as Wall Street reacts. This is evidenced by recent S&P500 index declines.

Long-term, a trade war could stunt global growth, hitting emerging markets and UK exporters. Yet Khalaf explains that while fleeing to ‘safe haven’ investments might seem like a good idea in choppy market conditions, the long-term effect of running to safety might not be that helpful.

“In the current market environment investors may well be wondering if it’s time to turn to safe havens to add some ballast to their portfolios,” he says.

“We ran some numbers to see how five key safe havens available to UK investors had performed over the last 10 years, though of course, that doesn’t guarantee the same returns will be delivered going forward.

“As the tables below show, there’s been a wide dispersion of returns and protection provided by safe haven investments over the last decade.”

Khalaf continues: “These assets are used by investors seeking a more cautious approach to investing and are usually paired with an equity portfolio to provide some ballast.

“You would normally expect the equity component of a portfolio to perform better over the long term, and true to form, the global stock market has left most safe havens for dust in the last 10 years. A global index tracker has returned 225.1%, compared with the average Cash ISA which has delivered 14.2%, or the typical gilt fund which has produced a return of -5.0%.

“It has been a terrific decade to be invested in the global stock market, in large part thanks to the meteoric rise of the titans of the US technology sector. It’s entirely possible that the next 10 years won’t be as kind to stock market investors, though history still suggests that returns will be superior to less risky asset classes. Looking at 10-year periods going back to 1899, Barclays reckons the UK stock market has beaten cash over 90% of the time.

“While seeking out safe havens in times of turmoil is perfectly reasonable, it’s important not to throw the baby out with the bathwater and jettison the stock market altogether. Indeed, as the figures below show, even safe havens come with risks attached, and it’s actually by diversifying across asset classes that you can take some of the rough edges off each of them.”

Photo credits: Unsplash