Donald Trump’s trade war has pushed investor anxiety about the world economy to its worst in recent memory, the boss of BlackRock has said.
Larry Fink, the chief executive of BlackRock, the world’s biggest asset manager, said Mr Trump’s return to the White House had seen protectionism “return with force” , with consequences for investors and the wider economy.
In his annual letter to shareholders, Mr Fink said: “I hear it from nearly every client, nearly every leader – nearly every person – I talk to: They’re more anxious about the economy than at any time in recent memory.”
Mr Fink also admitted that capitalism had not worked for all, with globalisation holding back “millions in wealthier nations” including the world’s biggest economy.
He said: “This extraordinary era of market expansion has coincided with – and was largely fuelled by – globalisation. And while a flatter world lifted 1bn people out of $1-a-day poverty, it also held back millions in wealthier nations striving for a better life.
“Today, many countries have twin, inverted economies: one where wealth builds on wealth; another where hardship builds on hardship. The divide has reshaped our politics, our policies, even our sense of what’s possible. Protectionism has returned with force.
“The unspoken assumption is that capitalism didn’t work and it’s time to try something new.”
Mr Trump has announced repeated waves of tariffs since entering office in January. He has promised to escalate this on Wednesday with a massive tariff plan he has dubbed “liberation day”.
Fears about blanket tariffs have sent stock markets plunging . The benchmark S&P 500 and the tech-heavy Nasdaq are currently set for their worst quarterly performances in about three years.
The threat of blanket tariffs has also seen economists tear up their predictions for economic growth, including the US economy.
Moody’s Analytics has raised its probability of a US recession to 40pc from 15pc, while Goldman Sachs now predicts a 35pc chance of recession, up from 20pc.
However, Mr Fink said there were opportunities for investors to seize. “We have lived through moments like this before. And somehow, in the long run, we figure things out,” he said.
While Goldman warned that the EU could be pushed into a recession by big tariff rises, Mr Fink said the darkening global backdrop was helping the bloc to “wake up”.
He added: “For the past decade, Europe’s economic outlook has been persistently pessimistic. Slow growth, stagnant markets and cumbersome regulation have dominated the headlines.
“Mario Draghi, former Italian prime minister and [former] head of the European Central Bank, recently pointed out that Europe has lowered trade barriers with countries outside the continent – but it hasn’t done the same internally among EU nations.
“Draghi highlighted an analysis by the International Monetary Fund (IMF), which paints a striking picture: For a German company, it may now be more attractive to do business in China than in neighbouring France.
“But I think Europe is waking up. The policymakers I talk to – and I talk to a lot – now see that the regulatory roadblocks aren’t going to remove themselves. They need to be addressed. And the upside is enormous. According to the IMF, reducing intra-EU trade barriers to the level between US states could boost productivity by nearly 7pc, adding an astounding $1.3 trillion [£1 trillion] to its economy—the equivalent of creating another Ireland and Sweden.”
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