VGSH - How Effectively Can The U.S. Economy Untether From China?

2025-04-18 15:30:00 ET

Summary

• Consistent with this sentiment, U.S. equity markets have recovered somewhat after their initial reaction to the 2 April announcements.
• Even after the latest tariff changes, we believe the chances of a U.S. recession remain elevated – close to a coin flip – and hinge on the ability of U.S. supply chains to pivot out of China to other sources of production fairly quickly, a process that won’t be seamless.
• The U.S. likely doesn’t have the additional domestic manufacturing capacity to absorb the lost Chinese production at any cost, due to the decades of erosion of the U.S. manufacturing base.

U.S. trade policy has evolved significantly in a matter of weeks. Most recently, many observers are interpreting the Trump administration’s ongoing changes to tariff policy, including delays, negotiations, and exemptions, as potentially tempering the overall disruption to the U.S. economy. Consistent with this sentiment, U.S. equity markets have recovered somewhat after their initial reaction to the 2 April announcements. The S&P Index, for example, was down roughly 9% as of 15 April, after having lost as much as 15% year to date in the days immediately after the 2 April tariff announcement....

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