Trump's Trade Policy: A Double-Edged Sword for Global Equities

Strategic Insights -

The recent tariffs imposed by President Trump on several countries, including the European Union, Mexico, Canada, and Japan, have sparked concerns about their impact on global equities. While the numbers seem to favor foreign stocks this year, the introduction of higher tariffs may alter the trajectory of global trade and economic activity. The administration's intentions are unclear, with some speculating that the threats are a negotiating tactic, while others believe that higher tariffs may be the ultimate goal. The outcome will have far-reaching implications for economic growth, trade, and the global trading system.

Key Takeaways:

  • The introduction of higher US tariffs on several countries has raised concerns about their impact on global equities, with some speculating that higher tariffs may be the ultimate goal.
  • The ratio of two ETFs, VXUS (foreign equities) vs. SPY (US equities), has reversed its earlier trend, indicating a fading leadership in foreign equities relative to the US.
  • Periodic but short-lived runs of foreign-stock outperformance have occurred in recent years, with late 2022/early 2023 being one such instance.
  • Amundi's head of global macro, Mahmood Pradhan, estimates that the effective tariff rate for all imports coming into the US would be about 15%, which is broadly negative for growth in every country involved in world trade.
  • The introduction of higher US tariffs has far-reaching implications for economic growth, trade, and the global trading system.
  • The administration's intentions are unclear, with some speculating that the threats are a negotiating tactic, while others believe that higher tariffs may be the ultimate goal.
  • The outcome will be influenced by the self-proclaimed "tariff man," President Trump, who has promised to impose tariffs on several countries.

Statistics:

  • The effective tariff rate for all imports coming into the US, if calculated an average across the board, would be about 15% (Amundi's head of global macro, Mahmood Pradhan).
  • The ratio of VXUS (foreign equities) vs. SPY (US equities) has reversed its earlier trend, indicating a fading leadership in foreign equities relative to the US.
  • Late 2022/early 2023 was a period of foreign-stock outperformance, with a similar trend in 2025 (based on the ratio of two ETFs).
  • The US benchmark SPDR S&P 500 ETF (SPY) has underperformed foreign equities in 2025, with the ratio of VXUS to SPY at 0.91 on July 14.

Sources:

  • [Finance.yahoo.com](https://finance.yahoo.com/news/live/trump-tariffs-live-updates-canada-eu-mexico-set-to-be-hit-with-30-to-35-rates-as-trump-amps-up-threats-200619235.html)
  • [Capitalspectator.com](https://www.capitalspectator.com/wp-content/uploads/2025/07/eq.region.etfs_.ytd_.barplot.2025-07-14.png)
  • [Cnbc.com](https://www.cnbc.com/2025/07/12/trump-tariffs-european-union-eu-mexico-trade.html)
  • [Cnn.com](https://www.cnn.com/2025/07/10/business/canada-tariff-trump)
  • [-wsj.com](https://www.wsj.com/opinion/tariffs-south-korea-japan-donald-trump-trade-a9075145)
  • [Reuters.com](https://www.reuters.com/world/china/high-priced-stocks-bonds-raise-tariff-threat-markets-2025-07-11/)