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The Trump administration’s recent effort to impose tariffs on steel and aluminum imports into the United States has provoked a significant backlash among free-market economists, business leaders, and Republicans in Congress, among others. They worry that the imposition of protectionist measures designed to insulate domestic manufacturers from lower-cost foreign competitors could result in retaliation from foreign governments on other products that could expand into a full-blown trade war.

Over the past four decades, the economic and trade relationship between the United States and China has been dramatically transformed, growing from about $2 billion in 1979 to approximately $612.5 billion in 2017. This places it among the most important bilateral economic relationship in the international economy. Now, however, that relationship is fraught with tensions due to differentials in growth, trade frictions and enforcement of trade rules along the technological frontier.

Despite an improved outlook, it is possible that the U.S. political authority will trigger a six-month review period for exiting the North American Free Trade Agreement (NAFTA) sometime during the next 90 days. At stake is more than $1 trillion in cross-border trade and more than 14 million jobs across three economies. While Mexico has the largest exposure to such an event—in the case of a hasty exit, its economy could contract 2.9 percent in 2019—both the United States and Canada have significant direct and indirect exposure to such a radical shift.

2017 failed to produce any break in the private markets trends observed in 2016.

Trump kicked of the month of March by announcing import tariffs of 10% on aluminum and 25% on steel. The U.S. financial markets, as expected, reacted negatively to the initial announcement with the Dow Jones Index falling over 400 points and major aluminum and steel users such as Ford and GM being particularly hard hit. Canada and the EU, the two largest exporters of steel to the United States, came out strongly against the tariffs, with the EU proposing retaliatory actions on certain U.S. goods in response. The current developments are unlikely to lead to a trade war.

U.S. economic momentum, already positive, will increase further due to the tax package. Interest rates are likely to rise throughout the year posing a headwind for longer duration core bonds. Equity valuations are underpinned by the interest rate and macro environment, but continued increases would become more concerning if inflation makes a comeback. Europe and Japan are also gaining momentum and are earlier in their economic cycles, contributing to the global synchronized growth. Individual risks are moderate, but collectively could pose a challenge, particularly in the second half.

Bitcoin looks here to stay, but will it be a niche or something more? The analogy to gold is useful, but with notable differences.