Europe is set to levy tariffs against a range of US goods - including motorbikes, blue jeans and bourbon whiskey - in retalation against aluminium and steel tariffs introduced by the US earlier this month.
This is just one of many fronts on which the US is fighting trade disputes - which has created some uncertainty around what is an otherwise optimistic picture for the world economy.
Rick Lacaille is the Global Chief Investment Officer with State Street Global Advisors.
Lacaille's Mid-Year Outlook outlines the low inflation and strong economic growth as good conditions for equity investing. According to Lacaille, investors should thread carefully as uncertainties with overseas trade wars, political challenges in Italy, and Brexit slow Europe's economic momentum.
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With tomorrow's launch of the European Union's retaliation to US tariffs and the continuing conflict between the US and China, the threat of a trade war is only increasing. "Investors are concerned about it. I don't think they are baking in the worst case scenario which is a fully blown trade war. I think investors are expecting this to be bites out of the trade system rather than a free for all," Lacaille said.
To protect their investments, Lacaille urges investors to "diversify more widely and look at opportunities in emerging market debt, local currencies, and hedging."
Aside from the tariffs, Trump's tax cuts left many US companies cash rich resulting in the possibility of extra competition distorting markets. According to Lacaille, the extra cash and competition are not distorting markets, but extending the economic cycle and increasing investments.
Lacaille, however, believes Europe should look to the US to identify where the EU will go in 18 months and the US perspective on the Irish economy remains "in a good spot."
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