When a global powerhouse like the United States abruptly imposes tariffs on its key trading partners, uncertainty ripples through the markets.
In the wake of the recent presidential election, tariffs have once again dominated headlines, fueling both speculation and concern. Many investors are wondering how these policies will shape the economic landscape in the coming months.
Is a trade war on the horizon? Will the market take a hit? What does this mean for my portfolio?
During President Trump’s first term, starting in 2017, China became the focal point for a broad range of U.S. tariffs. Although many analysts predicted these escalating trade tensions would weigh heavily on market performance, the reality is that markets are driven by a wide array of factors — not just tariffs.
In fact, as shown in Exhibit 1, both China and the United States delivered stronger cumulative returns than the MSCI World ex USA Index over Trump’s first four years in office (1). While tariffs certainly play a role in shaping security prices, they are only one piece of a much larger puzzle.
Growth of $1 During President Trump’s First Term
January 2017 – December 2020
Source: Crill & Green, 2025 (Dimensional Fund Advisors)
Of course, any presidential election can stoke anxiety among investors. Yet historical trends suggest that looking beyond political headlines and maintaining a long-term perspective often proves more beneficial.
Ultimately, market performance hinges on companies’ abilities to innovate, solve problems, and deliver value to consumers. In the grand scheme of things, this drive for progress tends to prevail, regardless of who holds office.
In times of uncertainty, a disciplined, long-term investment strategy can help you stay on course. Short-term market swings—driven by tariffs or political changes—often mask the underlying factors that power growth over time. By focusing on diversification, staying informed, and aligning your investments with clear objectives, you can navigate volatility and keep your financial goals in sight.
FOOTNOTES:
- Crill, W & Green, K (2025) Tariff Trepidation, Dimensional Perspectives.
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