The US Federal Reserve is signalling it is prepared to cut interest rates next month, but the central bank faces significant uncertainty as US trade deals with its three largest trading partners remain elusive.
Those deals centre on trade disputes that started in the first months of President Donald Trump's second term in office: China, Canada and Mexico.
In 2024, total US trade with China totalled about $658.9 billion, while it totalled $909.1 billion with Canada, and $935.1 billion with Mexico, according to the Office of the US Trade Representative.
While Mr Trump has touted trade framework agreements with major exporters including the European Union and India, deadlines for the US's three largest trading partners continue to be pushed back.
“The biggest issue for the Fed is going to be how are US companies going to deal with this,” said Arnim Holzer, global macro strategist at Easterly EAB.
“Are they going to save margins and fire employees? Are they going to allow margins to deteriorate and maybe not impact employment so much?”
Cross-border trade
US trade with its northern and southern neighbours has grown increasingly interconnected. Canada exported more than 75 per cent of its goods to the US last year, while Mexico exports about 80 per cent of its goods there.
Both Mexico and Canada have been hit with heavy tariffs tied to Mr Trump’s dissatisfaction with border security and drug trafficking, and both are operating under separate 90-day tariff deadlines with little clarity on how they will be resolved.
Canadian Prime Minister Mark Carney last week announced that he would be dropping many of the country's retaliatory tariffs, matching US exemptions for goods under the USMCA, in an apparent effort to restart trade talks with Washington.
“We are working on something. We want to be very good to Canada,” Mr Trump said after his Canadian counterpart dropped the retaliatory measures.
Mexico is also seeking to placate Mr Trump by raising tariffs on China as part of its 2026 budget proposal in September, Bloomberg reported on Thursday.
Meanwhile, businesses are rushing to claim exemptions under the United States-Mexico-Canada Agreement (USMCA) to avoid the 35 per cent tariff rate for Canada and the 25 per cent rate for Mexico. An analysis from Fitch ratings in August showed 81 per cent of goods imported from Canada were USMCA compliant in June, up from 56 per cent in May. Similarly 77 per cent of goods from Mexico met USMA requirements that month, up from 42 per cent the month prior.
The USMCA is up for review in 2026.
China
The Trump administration has also set back tariff implementation on China by an additional 90 days, pushing back the new deadline until mid-November. The extension came after talks between negotiators from Washington and Beijing in Stockholm last month.
The world's two economic superpowers had engaged in tit-for-tat escalatory tariffs on each other's imports.
Mr Trump had increased tariffs on Chinese imports to 145 per cent, and China had retaliated with a 125 per cent tariff. The US and China have since drawn back those tariffs to 30 and 10 per cent, respectively.
Still early days
This comes as Fed chair Jerome Powell raises greater concern for the labour market – the other side of central bank's dual mandate – than price stability.
“I think it's unlikely we're going to see certainty here in the short- to medium-term as [Mr Powell] considers a policy change,” said one geopolitical analyst.
Mr Powell suggested that tariffs could lead to a one-time increase in prices, although he said it is still early on in the process.
“It will continue to take time for tariff increases to work their way through supply chains and distribution networks,” he said during his Jackson Hole Symposium address in Wyoming last week.
Inflation data released on August 29 showed that core goods prices were unchanged in July versus June. Separate data released earlier in August showed that price pressures were beginning to appear in imported goods such as household furnishing.
On Thursday, Fed governor Christopher Waller said he is hearing “some rumblings” from the business community that they cannot continue to wait on the sidelines amid this uncertain tariff policy. Businesses had been postponing investment because of that uncertainty, he said.
“We could see … investment projects that were postponed begin to pick up, which would be positive for the economy. But how employment decisions evolve is more up in the air,” he said at the Economic Club of Miami.
The End of Loneliness
Benedict Wells
Translated from the German by Charlotte Collins
Sceptre
French business
France has organised a delegation of leading businesses to travel to Syria. The group was led by French shipping giant CMA CGM, which struck a 30-year contract in May with the Syrian government to develop and run Latakia port. Also present were water and waste management company Suez, defence multinational Thales, and Ellipse Group, which is currently looking into rehabilitating Syrian hospitals.
Company%C2%A0profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3Eamana%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2010%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Karim%20Farra%20and%20Ziad%20Aboujeb%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EUAE%3Cbr%3E%3Cstrong%3ERegulator%3A%20%3C%2Fstrong%3EDFSA%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinancial%20services%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%20%3C%2Fstrong%3E85%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESelf-funded%3Cbr%3E%3C%2Fp%3E%0A
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Sukuk explained
Sukuk are Sharia-compliant financial certificates issued by governments, corporates and other entities. While as an asset class they resemble conventional bonds, there are some significant differences. As interest is prohibited under Sharia, sukuk must contain an underlying transaction, for example a leaseback agreement, and the income that is paid to investors is generated by the underlying asset. Investors must also be prepared to share in both the profits and losses of an enterprise. Nevertheless, sukuk are similar to conventional bonds in that they provide regular payments, and are considered less risky than equities. Most investors would not buy sukuk directly due to high minimum subscriptions, but invest via funds.
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
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