Goldman Sachs warns: Trump's tariff threats may increase corporate bond risks, advises hedging investments.

Goldman Sachs credit strategist Lotfi Karoui said that investors should hedge their corporate bond investments, as yield spreads may widen if President Trump's tariff threats continue to disrupt the market. Karoui wrote in a report: "We continue to advocate for increasing downside protection using hedges, as the cost remains relatively low. An important lesson from events in 2018 is that if tariffs are extended, spreads may increase." The Bloomberg Index shows that global investment-grade corporate bond spreads have widened for seven consecutive days after narrowing to the lowest level in 17 years earlier this month. Credit investors are increasingly concerned that Trump's actions could spark retaliatory trade wars with other countries, undermining confidence among businesses and consumers. Trump has announced plans to impose a 25% tariff on imports from Canada and Mexico starting March 4, as well as an additional 10% tariff on Chinese imports. US Treasury bond yields fell slightly on Friday, and risk assets were sold off. In 2018, Trump's administration spent a whole year in dispute with China over tariffs. The Bloomberg Index shows that US investment-grade corporate bond spreads widened by 60 basis points to 153 basis points that year.