· Event impact
BlackRock warns US tariffs and deglobalization risk keeping rates elevated
Transmission path
Persistent supply-side shocks from tariffs and deglobalization can lead to structural inflation, forcing central banks to maintain higher policy rates and increasing the term premium on long-term bonds.
Market mechanism
Persistent supply-side shocks from tariffs and deglobalization can lead to structural inflation, forcing central banks to maintain higher policy rates and increasing the term premium on long-term bonds.
Extended read
In recent commentary, BlackRock has highlighted a critical macro theme for investors: the persistent impact of trade policy on inflation and interest rates. The world's largest asset manager argues that the recent wave of U.S. tariffs and broader geopolitical fragmentation are not just political issues but fundamental economic ones. By disrupting established supply chains and making goods more expensive, these policies increase the risk of recurring supply-side shocks. Unlike demand-driven inflation, which central banks are well-equipped to handle, supply-driven inflation is more problematic. BlackRock's conclusion is that this new regime of 'geopolitical fragmentation' can lead to a structurally higher level of inflation, which in turn will force central banks to keep interest rates elevated for longer than markets might currently expect. This has significant implications for asset allocation, particularly for the valuation of both equities and long-duration bonds.
Exposed assets
DGS10 · TIP · SPY
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