Markets surged yesterday (May 12) on news of a temporary tariff truce between the U.S. and China, with the S&P 500 climbing to its highest level in months. But BlackRock CEO Larry Fink remains wary of the economic turbulence tariffs could still bring. “There’s going to be a lot of volatility until we have greater certainty as to what is the new equilibrium,” the billionaire said today (May 13) at the Saudi-U.S. Investment Forum in Riyadh.
In Fink’s view, investors are still struggling to discern the Trump administration’s broader aims for reshaping global trade. That said, he believes the path forward is becoming clearer. “The equilibrium is probably sooner than we thought maybe two to three weeks ago,” he added.
The U.S. and China agreed yesterday to a 90-day pause on tariff escalation, scaling back their respective duties: U.S. tariffs are dropping from 145 percent to 30 percent, while China’s will decline from 125 percent to 10 percent.
Despite the reprieve, investors remain cautious amid ongoing global economic uncertainty, with many opting for defensive strategies such as holding cash. “When there is that uncertainty, you’re going to keep more and more money in cash, and that’s what we’ve witnessed,” Fink said, noting that this is a global phenomenon. In Europe, he pointed out, 12 trillion euros are currently held in bank accounts, while U.S. money market funds are sitting on $11 trillion.
Fink also emphasized that tackling economic uncertainty must include addressing the U.S.’s ballooning deficit—something he’s warned about in the past. “Let’s be clear: the U.S. deficits are an issue,” Fink said.
The U.S. economy shrank 0.3 percent in the first quarter. To reach a sustainable 3 percent growth rate, Fink said, the country will need to lean more heavily on private investment.