Amidst these geopolitical tensions, RHB analysts recommend a pivot towards defensive investments, focusing on sectors that can sustain earnings growth despite macroeconomic volatility.

Despite recent market volatility, U.S. policymakers have maintained their trade policies, contributing to ongoing global uncertainty.

China has taken a more assertive position in trade discussions, promoting itself as a champion of free trade even in the face of U.S. tariffs.

The current economic climate is at a critical juncture, necessitating prudent policy recommendations to ensure a stable and predictable trade environment.

Gourinchas highlighted that the global economic landscape, which has been stable for the past 80 years, is currently experiencing a major reset due to these abrupt tariff increases and rising policy uncertainties.

The potential bifurcation of global trade along geopolitical lines is prompting countries like India to seek trade agreements with both the U.S. and China to navigate these tensions.

Forecasts indicate that while China is expected to grow at 4.0%, the Euro Area is projected to stagnate at just 0.5%, reflecting the pervasive global economic uncertainty.

Small-cap firms in the region are being recognized for their growth potential, driven by specific sector catalysts, amidst the broader economic challenges.

The International Monetary Fund (IMF) has significantly lowered its 2025 growth forecast for the U.S. from 2.7 percent to 1.8 percent, attributing this adjustment to escalating trade tensions and tariffs.

The Bank of England has warned that ongoing geopolitical and trade tensions could negatively impact growth and financial stability, although current market conditions remain stable.

In the U.S., stock markets reacted positively to comments from Trump regarding potential tariff reductions, with major companies like Amazon, Nvidia, and Apple seeing notable gains.

While the U.K. is not on the brink of recession, economic uncertainty is affecting business and consumer confidence, as noted by Bailey.