Emma Wall: Hello, and welcome to the Morningstar series, "Market Reaction." I'm Emma Wall and joining me today is Hannah Anderson, Global Market Strategist for JPMorgan.

Hi, Hannah.

Hannah Anderson: Good morning.

Wall: So, it's very difficult for investors, professional and private alike, to keep up with Trump's trade policies. But what are the latest?

Anderson: Latest when it comes to trade, it's important to keep in mind it's not just a US story. What we are really talking about is on a very, very high-level countries around the world expressing economic anxiety through their trade policies towards the other. But on a much more micro and immediate level, and this is what investors should really be paying attention to, is you are talking about prices. Ultimately, you are seeing the US versus other countries, other countries versus the US negotiating over the cost of goods and services that cross their borders.

Now, that's not entirely set in stone. That doesn't necessarily mean prices are rising. But that's what you are seeing markets reflect. Ultimately, the hope for different countries when enacting different types of tariffs and trade restrictions is that prices rise, and consumers change their behaviors. Well, that's not necessarily a given in such a globalised world. Prices will rise but consumers may not change their behaviours. And so, what we are really talking about and what markets are most reflecting fears of is tariffs coming back into inflation and that's really what's gotten markets spooked over the past couple of weeks.

Wall: And we are sitting here having this conversation in Hong Kong and China has been one of the sort of key areas of target for Trump it seems. It has become more widespread recently. But specific to this region should we expect it to long-term impact the stock markets of China and Asia?

Anderson: I think the impact you need to be most concerned about is what happens to company operations within both the US and China. Because yes, the US and China trade a lot. China exports a lot to the US. The US does import a lot from China. But beyond that US firms do a lot of sales in China. Chinese firms are increasingly selling more and investing more in the US. And so, what you need to be most concerned about when it comes to stock markets and returns on investments, are the measures that each country could put in place to restrict what happens with foreign company sales within their borders.

Now, short-term, trade tensions are likely to produce nothing besides volatility. And as investors we have gotten used to that to an extent. It's still concerning. It's still something we are watching. It's still something we should all be wary of. But beyond moving prices around day-to-day isn't going to do much in terms of the fundamental earnings picture. However, over the long term, if you see measures put into place that restricts sales and operations and investments between these two countries, you could see it be a significant drag on earnings going forward.

Wall: And of course, in more recent news Trump has said that he wants to re-examine the tariffs with the EU block of countries. So, it is becoming a more global rhetoric. Should we expect to see markets, to your further point, because European countries are equally as global in their revenue stream, in their inter-trade, should we expect those countries to be affected in a similar way?

Anderson: I think so. Investors really need to be wary of any rise in protectionism globally. It's important to remember though that the US-China trade tensions are much more broad-based. It's across all products, across all investment channels and it's really an expression of US anxieties over China's emergence as really a global superpower, especially on the economic front.

When it comes to Europe, we've seen while tensions are rising and while there have been more headlines regarding the US-European trade, it has been so far targeted towards a narrow list of products. Specifically, steel and aluminum are the only ones that have gone into place so far. You are seeing talk about autos which would be a more significant impact on both the US and European Union given the nature of that relationship. However, you are seeing the early stages of negotiations over autos, which in my mind, mean investors don't need to be necessarily be concerned about that particular development right now.

Wall: And how much of this is genuinely down to the US being hard done by when it comes to trade deals and how much of it is down to Trump's very particular style of politics which involves quite a lot of powerplay?

Anderson: I think from the investor mindset, because we are all watching this from the outside and we are watching this in Hong Kong and investors are watching this globally, is what you need to keep in mind is that the US administration views deficits as an ultimate economic negative. Whereas from a more classical theory, they reflect both, a country's spending patterns as well as a country's net investment position internationally. The US invests a lot globally, which overall brings their balance of payments up closer to a net surplus.

Now, from the US perspective, this administration came in looking to renegotiate the US's economic relationship with the world. Now, the rest of the world as in many cases has spoken favorably towards that attitude and has expressed willingness to renegotiate some of the terms. Now, negotiations are naturally a tense affair. And what you are going to see and what you see in headlines are expressions of that tension. While tensions may rise, that's not the same thing as radically reshaping those relationships or harming those relationships.

And so, as you see these negotiations play out, I think you are going to see both sides of the negotiating table take strong stances. That's going to lead to some scary headlines. But as investors we need to keep our rational thinking caps on and look past what creative sound bites might provoke headlines and focus on what actually happens in terms of trade policy. Talk is not the same thing as action. And as far as the US and the rest of the world's trading relationships go, we've seen a lot of talk and very little action.

Wall: Hannah, thank you very much.

Anderson: Thanks for having me.

Wall: This is Emma Wall for Morningstar. Thank you for watching.