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Letter from America: Trump’s truckload of tariffs

The managers of The North American Income Trust discuss a busy two months for US markets…

If a week is always a long time in markets, the two months since President Trump’s second inauguration have seemed near to an eternity.

The pace of change under the returned president has been breathtaking. Seemingly every day, a new policy announcement has rocked both the political establishment and markets. Given just how much the administration has done in that time, we thought it would be worth taking a moment to reflect and remind ourselves of how US markets have fared in 2025 so far.

Tariffs, baby, tariffs

In terms of their impact on markets, President Trump’s tariffs are surely the most notable feature of his second presidency so far. On February 10, a presidential proclamation announced tariffs on all imports of steel and aluminium. These tariffs would have a significant effect on both Canada, the US’s largest supplier, and the European Union, which both announced counter tariffs.

The immediate impact of these tariffs was felt by the industries expected to be most affected, such as automobile and appliance companies. Both have seen a fall in share prices. However, a decline in economic sentiment more widely – such as consumers being depressed by repeated negative headlines – could impact other industries, like airlines. Indeed, the sector has seen a revision in earnings forecasts already.

The long run real impact of the tariffs remains unclear though.

The less Magnificent Seven

Elsewhere in the first quarter, we saw the (in some corners much anticipated) stutter in the rapid ascent of the Magnificent Seven. We say ‘elsewhere’ because the trade rhetoric had, at worst, a secondary impact on them.

Instead, Deepseek’s claims surrounding the development of its own AI model called their escalating share prices into question. Deepseek claimed that its model used less sophisticated chips – and fewer of them. It’s worth noting that a lot of the market had already started cooling on the Magnificent Seven, as seen by several individual days of volatility in 2024. For both valuation and yield reasons, we hold just two of the set in our portfolio.

Nonetheless, the apparent end of the Mag 7’s run does mark a new chapter for US markets.

Same as it ever was?

As some of our colleagues have already pointed out, a drawdown (more than 10% fall) in the US market isn’t exactly unprecedented. Over the past four decades, almost half of these years have featured such a fall in the US market. While no future is guaranteed, historically, the market has recovered – and thrown up new opportunities in the process.

However, we are not there yet. In our next letter, we will outline how we are investing in a market like this…

Portfolio

A grouping of financial assets such as equities, bonds, commodities, properties or cash. Also often called a ‘fund’.

Valuation metrics

Metrics used to gauge a company’s performance, financial health and expectations for future earnings, eg. price to earnings (P/E) ratio and return on equity (ROE).

Volatility

The rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility the higher the risk of the investment.

Yield

The level of income on a security over a set period, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.

Disclaimer

Janus Henderson Fund Managers UK Limited was appointed as the AIFM of the North American Income Trust with effect from 1 August 2024. Prior to that date, the North American Income Trust’s AIFM was abrdn Fund Managers Limited and all information contained in this document should be considered accordingly.

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Before investing in an investment trust referred to in this article, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

There is no guarantee that past trends will continue, or forecasts will be realised.

 

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Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • Losses could be incurred if a counterparty became unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
  • Some of the administrative expenses are taken from capital. This allows more income to be paid but it may also restrict capital growth or even reduce the capital over time.
  • Derivatives may be used with the aim of reducing risk or managing the portfolio more efficiently. However, this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk (as well as the potential for greater reward) than a portfolio that is diversified across more countries.
  • This investment should be held as part of a broader diversified portfolio. Balancing it with investments that have different risk profiles can help reduce the impact of any single investment underperforming.
  • The Company may borrow to invest, which could magnify gains or losses.
  • As the Company may borrow to invest, changes in interest rates could increase or decrease the cost of any borrowings.
  • The Company invests in the shares of other companies. These shares may become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
  • Your return on investment is directly related to the market price of the Company's shares, which may be higher (trading at a premium) or lower (trading at a discount) than the value of its underlying net asset value assets. This means your returns may differ from the performance of those assets.
  • While active management techniques are typically positive for performance, this approach may also result in periods of underperformance relative to the benchmark and comparable passive and index-tracking funds, particularly during unexpected market shifts.
  • Shares can gain and lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may rise and fall in line with the underlying equity markets.
  • When a portfolio is concentrated (has a significant portion of its assets invested in a limited number of holdings), an adverse event impacting even a small number of holdings could create significant volatility or losses.
  • If the companies in which the portfolio is invested persistently reduce their dividend payments, the Company will find it more difficult to maintain or grow its own dividend payments each year.
  • The portfolio invests in currencies other than sterling, meaning fluctuations in exchange rates could affect returns.
  • The Company maintains a portfolio with a bias towards income-generating companies. This may result in the Company significantly underperforming or outperforming the wider market.