SINGAPORE – Raw materials are at great risk as Donald Trump’s White House prepares to pull the trigger on tariffs. UBS Group warned metals to energy will be hurt should US levies spark a global trade war, while commodity powerhouse Australia forecast only a damaging race to the bottom.

“Obviously, going into a deep trade war, industrial commodities are going to be negatively affected,”  Dominic Schnider, head of commodities and Asia-Pacific foreign exchange at the UBS’s bank’s wealth-management unit, told Bloomberg Television on Wednesday. He added: “It’s still good for gold.”

The risks of a global escalation surged this week as the president sticks to his plan for tariffs, provoking the departure of Gary Cohn as his top economic adviser. The European Union has vowed to respond should steel and aluminium levies be introduced. Separately, the Trump administration is considering imposing additional tariffs on Chinese goods to punish Beijing for alleged theft of intellectual property, according to people familiar with the matter.

“We might not get our acceleration in global growth to 4.1% that we expect this year,” said Schnider. “So a deceleration will be bad. What really drives commodity returns on the industrial side is growth momentum.”

There’s been a chorus of warnings about the potential fallout from the US tariffs, with the International Monetary Fund saying possible import restrictions “are likely to cause damage not only outside the US, but also to the US economy.”

Australia – the world’s largest iron-ore exporter, with deep trade ties to China, the top commodity user – weighed in on Wednesday.

'HISTORY TEACHES US'
“History teaches us that there are no winners in a trade war,”  Australia Prime Minister Malcolm Turnbull told a business summit in Sydney. “A trade war is a race to the bottom that makes us all poorer, leaves our citizens with less choice and fewer opportunities.”

Prices of most industrial commodities retreated as investors reacted to Cohn’s departure. Copper lost as much as 0.7% to $6 956 a metric ton on the London Metal Exchange, as nickel and aluminium also declined. Brent dropped while gold held recent gains.

Cohn’s move “opens the environment up to whole new wave of uncertainty,” said Michael O’Rourke, chief market strategist at JonesTrading Institutional Services. “The likelihood of a trade war just jumped dramatically.”