Recently, Michael Sonnenfeldt — the founder of TIGER 21, a peer network of ultra-high-net-worth investors — discussed with Crain Currency how members of his organization are positioning their portfolios in response to tariffs and market volatility. With new tariffs on steel and aluminum imports, an increasingly protectionist trade environment, and market volatility shaking investor confidence, many industries are bracing for impact. He highlights the importance of diversification, assesses sector-specific risks, and discusses the historically low cash reserves among wealthy investors, which could signal either confidence or market overvaluation. The discussion on the carried interest tax loophole adds a policy dimension to investment considerations.
While fine art and collectibles have long been considered alternative assets, these economic shifts could pose fresh challenges for artists, collectors, and dealers alike. For those who buy, sell, or invest in art, understanding how these macroeconomic trends might shape the market is essential. From rising costs and regulatory hurdles to shifts in investment behavior, the art market is at an inflection point. But with the right strategy, it’s possible to navigate these turbulent waters and even find opportunities amid the uncertainty.
Tariffs, Trade And The Art Market: A Perfect Storm?
At first glance, tariffs on steel and aluminum might not seem like they would impact the art world. After all, paintings and sculptures aren’t exactly raw industrial materials. But dig a little deeper, and the ripple effects become clear.
For artists who rely on imported materials—such as rare pigments, high-quality canvases, or sculpting stone or metals—costs could rise, increasing the price of production. Galleries and auction houses that import artwork from overseas may see higher tariffs on art and antiques, making international acquisitions more expensive. Even logistics costs for transporting art could be affected by broader trade restrictions, impacting collectors who buy and sell globally.
Currency fluctuations also play a role. If tariffs and market instability weaken the U.S. dollar, foreign buyers may find American art more attractive, boosting sales for domestic artists. On the flip side, a stronger dollar would make imported artwork more expensive, potentially dampening enthusiasm for European or Asian art among U.S. collectors.
Where Wealthy Investors Are Putting Their Money—And Why It Matters for the Art Market
Sonnenfeldt’s analysis reveals an interesting trend: Wealthy investors are doubling down on traditional long-term assets like real estate and private equity, with a historically low allocation to cash—a level not seen since 2007, just before the financial crisis.
This could be interpreted in two ways. On the one hand, it signals confidence in the economy, suggesting that investors are willing to take risks. On the other, it could be a warning sign—historically, overconfidence has preceded major market corrections.
For the art world, this matters. While fine art has long been a favored alternative asset, it competes for capital with other investments like real estate, private equity, and stocks. If wealthy investors are allocating more to traditional assets and less to collectibles, speculative art investments may see a slowdown. This means that emerging artists and contemporary art markets—which thrive on speculative buying—could face headwinds. Conversely, established artists and blue-chip collectibles may remain attractive as a hedge against inflation.
Adapting To A New Reality: What Artists, Dealers And Collectors Can Do Proactively
1. Diversify Sales Channels And Markets
With international transactions becoming more complex, artists and dealers should focus on strengthening domestic and regional markets. Exploring digital platforms such as NFTs, online galleries, and fractional art ownership models can also help expand reach beyond traditional collectors, but are still untested markets for any downturn.
2. Optimize Supply Chains And Logistics
For artists and galleries, sourcing materials locally can help avoid tariff-related price increases. Dealers should negotiate better shipping and insurance terms and explore bonded warehouses or freeports to defer import taxes until a sale is made.
3. Align With Changing Investor Sentiment
Since many ultra-wealthy investors are focusing on real estate and equities, dealers and art advisors should position fine art as a stable long-term investment. Highlighting historical appreciation trends and drawing comparisons to other tangible assets can attract capital that might otherwise go to real estate or private equity. Additionally, artwork can be seen as an enhancement for real estate investments when it is placed on display.
4. Stay Ahead Of Regulatory Changes
New tariffs, taxation policies, and import/export restrictions could reshape art transactions. Collectors and dealers should work closely with customs brokers and legal advisors to ensure compliance and mitigate unforeseen costs.
Estate And Succession Planning: The Overlooked Challenge For Artists And Collectors
One often-overlooked consequence of economic shifts is their impact on estate and succession planning for artists and collectors. As artwork appreciates over time, proper planning becomes essential to preserve both artistic legacies and financial assets.
For collectors, new tax policies or estate tax reforms could significantly impact how art is passed down to heirs. Without proper structuring, heirs may face massive tax liabilities, forcing them to sell pieces they might have otherwise kept in the family. Strategies such as trusts, estate freezes, or fractional gifting can help mitigate estate tax burdens while ensuring a smooth transition of ownership.
For artists, estate planning is crucial both to minimize current income tax from the sale of self-created artwork and estate tax on the transfer of artwork, all while maintaining control over their work posthumously. Estate plans must have clear instructions, how to resolve disputes over copyrights, reproduction rights, and ownership to avoid lengthy legal battles—as seen in the estates of artists like Picasso and Basquiat. Setting up artist-endowed foundations, licensing agreements, and trusts can safeguard an artist’s work and ensure their legacy is managed according to their wishes.
Looking Ahead: A Market In Flux But Full Of Opportunity
While tariffs and economic volatility introduce new challenges, they also present opportunities for those willing to adapt. A downturn in the value of artwork may be an opportunity to transfer artwork or collectibles at a significant discount to its long-term value. The art market has weathered recessions, booms, and financial crises before — most recently during the Great Recession of 2008—and it will again. By staying informed, diversifying strategies, and planning, artists, collectors, and dealers can position themselves for success in this evolving landscape.
Whether through embracing digital transformation, strengthening local networks, or proactive planning, those in the art world have an opportunity not just to survive but to thrive in the face of change. After all, history has shown that in times of uncertainty, art endures.
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