Markets not fully pricing in inflation risk from tariffs, warns UBS chief

by Jan-Henrik Förster and Francine Lacqua

UBS Group AG Chief Executive Officer Sergio Ermotti warned that markets may not fully reflect the inflationary risk posed by US President Donald Trump’s tariffs. 

Although “the tariff topic has been somehow already priced in the market,” this doesn’t apply to all “negative outcomes,” Ermotti said in a Bloomberg Television interview on Tuesday.

“I can see inflationary pressure” on the back of tariffs, “and that in turn would mean that central banks would need to stop their easing path and potentially even reverse,” he said. That is “something that is not priced in the market.”

The comments come shortly after Trump agreed to delay 25% tariffs on Canada and Mexico for a month after both US neighbors agreed to take tougher measures to combat migration and drug trafficking at the border. That has warded off a continental trade war for now.

Trump declared victory while hinting that tough negotiations are still ahead. He has taken aim at the US trade deficit with Canada.

Ermotti said the parties involved in the various tariff debates have showed a “willingness to negotiate.”

Tariffs make imports more expensive, typically pushing up inflation, which can impact economic activity. That can weigh on the willingness of banks to issue loans and also on risk appetite of wealth clients. 

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