Calm in the tariff storm

The past couple of weeks have been pretty wild for the global stock markets, with sharp declines caused by new tariffs rolled out by the U.S. administration. It’s definitely unsettling, but with some perspective, we can better understand what’s happening and how to handle it.

A brief recap

The U.S., led by President Donald Trump, recently slapped a baseline 10% tariff on all imports, with even higher rates on certain countries. China’s imports, for instance, are being taxed at 34%, Vietnam at 46%, and the European Union at 20%. These “reciprocal tariffs” are part of an effort to fix trade imbalances and protect U.S. industries, but they’ve also stirred up a lot of tension, as affected nations are firing back with their own tariffs.

But what are the possible reasons behind the tariffs?

1. Negotiation tools: Trump is potentially using these high tariffs to push trading partners into renegotiating trade deals that benefit the U.S.
2. Economic protection: They’re designed to give domestic industries a leg up by making imported goods more expensive.
3. Global Trade Power Play: Tariffs also double as a way to strengthen the U.S.’s position in the global economy by reshaping trade relationships.

 

How Are These Tariffs Impacting the Economy?

It’s early days, but the tariffs could, and in some cases already are, having an impact on a few fronts:

• The U.S. economy: Some industries may see short-term gains with less competition, but others may struggle with higher input costs, which could push up prices for everyone. What’s worrying economists is the risk of stagflation – a combination of slow economic growth and high inflation. It it happens, it could really hit consumer spending in the U.S. and even lead to higher unemployment.
• Global markets: Stock markets around the world have taken a hit with Asian stock markets having dropped a large amount, with retaliatory tariffs adding to the problems.

There is a potential silver lining… The current uncertainty is largely due to the introduction of these tariffs, which means if they were removed or reduced (say via a trade deal), the markets could potentially bounce back quickly.

Reminders during scary times

There are some key lessons to remember during these times that can help:

1. Volatility is a normal feature of healthy markets: Drops like these are unnerving, but they’re not new. Historically, the stock market sees intra-year declines of around 14%.
   

   Source: JPMorgan Guide to the Markets; As of 31 March 2025
   

   Investors might recall the gut-wrenching volatility during the 2008 financial crisis or the COVID-19 pandemic. Those times were scary, but the market recovered—and it always does in the long term.

2. Timing the market isn’t the answer: Trying to predict the highs and lows is a losing game. It’s a strategy that is almost impossible to get right and can prove costly if you miss even one or two of the best days.
   

   Source: Dimensional Fund Advisors; 2025

   Instead, staying invested and keeping your focus on the long term has consistently proven to be a winning strategy.

3. The Power of Diversification and Discipline: By spreading your investments across thousands of companies around the world, owning an appropriate amount in high quality bonds and holding sufficient cash to fund every day spending and emergencies, we can soften the impact of these sharp stock market falls. And by sticking to a well-thought-out plan, you avoid making emotional decisions that could hurt you in the long run.

As a final thought, our clients’ financial plans are built with the expectation that temporary declines, like the one we’re in now, will happen. These plans focus on long-term growth, not short-term noise. If you’re feeling uneasy, take comfort in the fact that market downturns are just a normal part of the investing journey.

It’s an uncertain time, but history shows that patience and smart planning win out. If you feel like you want to chat through any of these concepts or are just worried in general, please don’t hesitate to reach out. This is what we are here for.

Please note that past performance is no guide to future returns.