Markets
Does America View Its Trade Relationships as Fair?
Does America View Its Trade Relationships as Fair?
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Understandably, most people are not experts on the subject of trade.
But while the average person won’t likely be able to guess the U.S. trade deficit with Mexico, perceptions of trade relationships in the public eye are still a crucial indicator.
If the majority of Americans think they are getting the short end of the stick on international trade, this sentiment ultimately affects how politicians campaign, how policy decisions are made, and the success of the wider economy.
U.S. Perceptions of Trade
In today’s chart, we break down the data from a recent Gallup poll on how Americans view the country’s trade relationships.
At a high level, here is how it looks by country:
| U.S. Trade Partner | Fair | Unfair | Don't know / No opinion |
|---|---|---|---|
| Canada | 65% | 24% | 10% |
| European Union | 56% | 29% | 15% |
| Japan | 55% | 33% | 12% |
| Mexico | 44% | 46% | 11% |
| China | 30% | 62% | 9% |
Source: Gallup, June 18-24, 2018
The majority of Americans think relationships with Canada (65%), the European Union (56%), and Japan (55%) are fair. When it comes to Mexico, respondents are split (44% fair, 46% unfair).
Meanwhile, it’s clear that most Americans think they are getting the short end of the stick with China, with 62% of respondents describing the relationship as unfair.
The China Problem
China is America’s largest trading partner, so this negative sentiment has meaningful implications.
The balance of trade that the U.S. has with China is also crystal clear: in 2017, the two countries traded $636 billion of goods, but the vast majority of this number comes from Chinese imports into the United States:
Most economists actually think that trade deficits are less important than they appear, but this trade gap is also visceral for many people. After all, U.S. exports barely make a dent in the mix, and this sends a message that America is “losing”.
Between the above trade deficit, intellectual property issues, and jobs going overseas, it’s understandable why the perception of Chinese-U.S. trade is under fire in terms of public sentiment.
And with the start of the recent trade war, the view on China could sour even further.
The Partisan Perspective
Interestingly, Democrats and Republicans have very different views on U.S. relationships, including the one with China:
| U.S. Trade Partner | Fair (Democrats) | Fair (Republicans) |
|---|---|---|
| Canada | 82% | 49% |
| European Union | 70% | 42% |
| Japan | 65% | 46% |
| Mexico | 59% | 29% |
| China | 38% | 21% |
Source: Gallup, June 18-24, 2018
Comparing Republicans and Democrats, three different relationships have opinion gaps of about 30%: Canada, European Union, and Mexico. In all cases, Democrats favored the relationships far more than Republicans.
That said, when it comes to China and Japan, the parties are slightly more aligned.
Only a minority in both parties thought the U.S. trade relationship with China was fair, with 21% of Republicans and 38% of Democrats in agreement.
Markets
Visualizing Portfolio Return Expectations, by Country
This graphic shows the gap in portfolio return expectations between investors and advisors around the world, revealing a range of market outlooks.
Visualizing Portfolio Return Expectations, by Country
This was originally posted on Advisor Channel. Sign up to the free mailing list to get beautiful visualizations on financial markets that help advisors and their clients.
How do investors’ return expectations differ from those of advisors? How does this expectation gap shift across countries?
Despite 2022 being the worst year for stock markets in over a decade, investors around the world appear confident about the long-term performance of their portfolios. These convictions point towards resilience across global economies, driven by strong labor markets and moderating inflation.
While advisors are optimistic, their expectations are more conservative overall.
This graphic shows the return expectation gap by country between investors and financial professionals in 2023, based on data from Natixis.
Expectation Gap by Country
Below, we show the return expectation gap by country, based on a survey of 8,550 investors and 2,700 financial professionals:
| Long-Term Annual Return Expectations | Investors | Financial Professionals | Expectations Gap |
|---|---|---|---|
| 🇺🇸 U.S. | 15.6% | 7.0% | 2.2X |
| 🇨🇱 Chile | 15.1% | 14.5% | 1.0X |
| 🇲🇽 Mexico | 14.7% | 14.0% | 1.1X |
| 🇸🇬 Singapore | 14.5% | 14.2% | 1.0X |
| 🇯🇵 Japan | 13.6% | 8.7% | 1.6X |
| 🇦🇺 Australia | 12.5% | 6.9% | 1.8X |
| 🇭🇰 Hong Kong SAR | 12.4% | 7.6% | 1.6X |
| 🇨🇦 Canada | 10.6% | 6.5% | 1.6X |
| 🇪🇸 Spain | 10.6% | 7.6% | 1.4X |
| 🇩🇪 Germany | 10.1% | 7.0% | 1.4X |
| 🇮🇹 Italy | 9.6% | 6.3% | 1.5X |
| 🇨🇭 Switzerland | 9.6% | 6.9% | 1.4X |
| 🇫🇷 France | 8.9% | 6.6% | 1.3X |
| 🇬🇧 UK | 8.1% | 6.2% | 1.3X |
| 🌐 Global | 12.8% | 9.0% | 1.4X |
Investors in the U.S. have the highest long-term annual return expectations, at 15.6%. The U.S. also has the highest expectations gap across countries, with investors’ expectations more than double that of advisors.
Likely influencing investor convictions are the outsized returns seen in the last decade, led by big tech. This year is no exception, as a handful of tech giants are seeing soaring returns, lifting the overall market.
From a broader perspective, the S&P 500 has returned 11.5% on average annually since 1928.
Following next in line were investors in Chile and Mexico with return expectations of 15.1% and 14.7%, respectively. Unlike many global markets, the MSCI Chile Index posted double-digit returns in 2022.
Global financial hub, Singapore, has the lowest expectations gap across countries.
Investors in the UK and Europe, have the most moderate return expectations overall. Confidence has been weighed down by geopolitical tensions, high interest rates, and dismal economic data.
Return Expectations Across Asset Classes
What are the expected returns for different asset classes over the next decade?
A separate report by Vanguard used a quantitative model to forecast returns through to 2033. For U.S. equities, it projects 4.1-6.1% in annualized returns. Global equities are forecast to have 6.4-8.4% returns, outperforming U.S. stocks over the next decade.
Bonds, meanwhile, are forecast to see 3.6-4.6% annualized returns for the U.S. aggregate market, while U.S. Treasuries are projected to average 3.3-4.3% annually.
While it’s impossible to predict the future, we can see a clear expectation gap not only between countries, but between advisors, clients, and other models. Factors such as inflation, interest rates, and the ability for countries to weather economic headwinds will likely have a significant influence on future portfolio returns.
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