Tariff Trepidation
One of the focal points following the presidential election is the potential for an increase in tariffs applied to goods produced outside the US. Many investors have wondered what this could mean for markets.
One period offering perspective on this issue is President Trump’s first term in office. Beginning in 2017, the administration eyed China as a target and, by 2018, began imposing tariffs across a range of products. The next couple of years saw back and forth trade discussions that eventually led to an agreement, though pre-existing tariffs remained in place. Despite all this uncertainty, both China and the US posted higher cumulative returns than the MSCI World ex USA Index over the four years of Trump’s term.
Markets are forward-looking, and economic impact from initiatives such as tariffs are likely already reflected in current market prices. When these expected developments come to pass, the effect on markets may be muted.
Growth of $1 During President Trump’s First Term
January 2017–December 2020
Tariffs are only one of many factors that can impact security prices. Investors may be better off sticking with the plan rather than trying to outguess the market based on potential tariff policy changes.
This article originally appeared in Short N Sweet, a newsletter for Dimensional clients.
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