Liberation Day, one year on: a lesson in active management

One year after Donald Trump’s ‘Liberation Day’ tariffs sent shockwaves through markets, threatening to lift US tariff rates from 2.5% to as high as 23%, the biggest gains came not from predicting policy, but from acting decisively in the fallout of one of the most dramatic shifts in global trade policy in decades.

The announcement triggered an immediate sell-off across global equities, bonds and the US dollar, as investors braced for disrupted trade, weaker growth and surging inflation. The scale and unpredictability of the policy which have become familiar hallmarks of Trump’s media-savvy but controversial leadership style, added to the uncertainty.

Rather than retreat, David Coombs, fund manager of the Rathbone Multi-Asset Portfolios, moved quickly to reshape portfolios, buying into world-leading companies at discounted valuations. Positions were added in computer chip factory Taiwan Semiconductor Manufacturing Company, top-end chip designer Nvidia and Canadian e-commerce company Shopify, alongside German warehouse kit and automation expert Kion, smartgrid and electrification Schneider Electric, US universal bank Morgan Stanley and British pharmaceutical firm AstraZeneca. All businesses with global reach, pricing power and strong alignment to long-term technological and industrial trends.

David Coombs says: “This was a scary, risky time. But we thought it wasn’t a time to panic and cut and run. Investing comes with the risk of market falls – it’s the price we pay for better returns in the long run. Often, you must stick to your guns to reach those long-term returns. So, we assessed our portfolios, gauging which were least likely to be heavily affected, and bought those assets that we thought were on sale – those that were falling simply because everything else was.

“We also accelerated the diversification of our government bond holdings. We added some US Treasuries at cheaper prices, but we bought European, Australian and developed Asian sovereigns as well. We have continued to do this in the year since. We have kept our US weightings, however.”

This diversification proved critical. While US equities have since rebounded strongly, both the dollar and Treasuries remain significantly weaker than pre-tariff levels, reflecting ongoing fiscal strain and policy uncertainty.

Despite widespread fears, the economic fallout was far less severe than expected. Global growth slowed but avoided recession, supply chains were reshaped rather than broken, and inflation did not surge as predicted. 

Behind the volatility, the direction of travel from Washington has been more consistent than it first appears: a push for energy independence, lower borrowing costs, deregulation and tax cuts, alongside efforts to onshore key industries, boost tariff revenues and bring overseas profits back into the US. For investors, understanding that agenda has mattered far more than reacting to each headline.

For Coombs, the lesson is clear, “Trade flows adapted quickly like water finding the path of least resistance, while resilient US consumer spending helped sustain momentum even as sentiment weakened. We didn’t make these decisions because of Trump’s Liberation Day tariff; the upheaval just gave us the opportunity to make these trades more quickly and at better prices. Our plan was based on a longer-term view of how technologies, demographics and policy decisions will affect the world.”

One year on, portfolios remain positioned for those enduring trends, with additional exposure to global energy majors, Total, Chevron and Shell providing a hedge against geopolitical risk in an increasingly uncertain world.