Weeks of shuttle diplomacy between Beijing and Washington have yielded nothing. Illustration: iStock
The US-China trade war has had an adverse effect on the world's second-largest economy. Image: iStock

As China-US relations teeter on the brink of what could lead to the biggest trade war in the 21st century, it’s vital that investors remain vigilant and avoid becoming complacent.

Trade tensions between the US and China have shown little signs of abating recently, with markets all over the world sliding in tandem with the news. Investor sentiment tumbled further after it emerged that US President Donald Trump is preparing for another crackdown on Chinese investments in the US.

Until now, markets have been nonchalant about this for the most part, perhaps in part due to the belief that a trade war between the world’s two biggest economies would never come to fruition as it would be damaging on too many levels to too many parties.

It’s vital that investors ensure that their portfolios are properly diversified and mitigate risk in the process

However, sentiment is now shifting alongside the Trump administration’s increasingly aggressive stance on what it views as China’s unfair trade practices. By escalating the trade war via steel, aluminum and goods tariffs worth up to $50 billion, the US president is even making America’s allies nervous.

In the last couple of weeks, in particular, Trump has been very vocal about policies that affect major asset classes, which include the above-mentioned commodities market. As such, investors attempting to manage and grow their wealth in this developing landscape cannot afford to be complacent as things unfold.

In fact, it’s vital that investors ensure that their portfolios are properly diversified and mitigate risk in the process.

As we’ve seen time and again, diversification is the most effective way for investors to lessen their risk exposure while safely maximizing returns. And indeed, this must always be balanced with a careful and considered approach towards new financial opportunities, which always present themselves during times of market volatility.

In all likelihood, Trump’s haughty tactics are negotiating strategies more than anything else, which is to say that it’s unlikely that he will cause any substantial and lasting disruption to global trade patterns.

But since there is still a chance of things going sideways, the implications of a possible fallout due to a global trade war on growth could wreak havoc on portfolios that haven’t been rebalanced in a while. So it’s safe to say that investors need to review their wealth portfolios with this in mind.

Looking ahead, investors should get ready for an uptick in political posturing from the parties involved, which weigh in on markets in some shape or form.

As a Trump-driven trade war looms on the horizon, a knowledgeable and hands-on fund manager is that piece of the puzzle that will help investors to circumvent risk and embrace potential opportunities.

Nigel Green

Nigel Green founded deVere Group in 2002 from a single office in Hong Kong after discovering a niche market for expatriates in the financial services sector. Since then, it has grown to become one of the largest independent financial advisory organizations in the world with offices and clients across the globe.