So many gyrations since a year ago. President Trump’s tariff revisions and his trade deals. The US Supreme Court ruling against his 2025 onslaught. New temporary tariffs to replace those struck down. Upcoming refunds now? More tariffs to replace the temporary ones? More deals? Details. Beyond the Iran war, many investors still sweat the twists in US President Donald Trump’s tariff tango. You should skip this stress. Why? Surprises sway stocks most. Widely known tariff terror now packs little real surprise power regardless of whatever Trump does.
February’s ruling and Trump’s subsequent actions and threats do not change my 2026 outlook – which itself didn’t feature tariffs heavily. Tariff turmoil is old news, and here is why that matters.
Don’t misunderstand: tariffs are always bad – especially for the imposing nation, as US stocks’ heavy 2025 lag versus the MSCI All-Country World Index (ACWI) showed. When President Trump unveiled his initial “Liberation Day” tariffs, their scope, size and bizarre oddity were a sharp downside surprise. So, stocks swooned fast, pre-pricing worst-case scenarios of retaliation against the US and deep hits to world trade.
But as I detailed here last June, legal and logistical hurdles meant reality would prove less bad than feared. So it was. The World Bank estimates global trade grew 3.4 per cent in 2025. Even Chinese exports – among Trump’s chief tariff targets – rose 5.5 per cent, despite US-bound shipments plunging. Those trends, while superficially complicated, hold now.
Why tariffs did not bite
Consider why tariffs did not bite as feared. First, for many tariffed items, firms found workarounds, such as transhipping. Consider: China’s 2025 exports to South-East Asian economies boomed. In parallel, the US's full-year 2025 imports from Asean nations leapt 29 per cent in February. That is transhipping avoidance, not a coincidence.
Second, in last May’s column I noted the US's Customs and Border Protection subset that oversees tariff inspection and collection had only about 2,500 employees to monitor hundreds of entry locations. Hence, and somewhat startlingly, it only performed 465 audits in the fiscal year 2025 … for over 50 million shipments entering the US. That's a ripe environment for illegal avoidance.
And confusion? The globalised world cannot unwind fast. Few products come wholly from one nation. If a good is designed in the UAE, built in China with parts from 20 different countries, using US machinery, what is the nation of origin? What tariff rate applies? That is before the transhipping and illegal tariff avoidance, which abound.
Yes, firms frontrunning tariffs boosted 2025 trade. They foresaw levies and stockpiled. Hence, US goods imports boomed 52 per cent annualised in Q1 as inventories surged. The next three quarters? They tanked -35, -7 and -3 per cent annualised, respectively. That rippled across global GDP. Many fear that those stockpiles are running out. Don’t. Firms keep finding new and better workarounds.
In April 2025, the World Bank estimated US tariffs averaging 28 per cent of sales. Its January update cut that to 17 per cent. Go lower! With most 2025 receipts in, actual US tariffs collected averaged less than 10 per cent. February’s US Supreme Court ruling lowered that to around 8 per cent. If Trump pushes his new temporary global levies to 15 per cent legal maximums, that could rise back to 10 per cent. That is not good, but it is still vastly better than initially feared.
Another reason tariffs didn’t bite harder? Exemptions – which abound globally. Over half of US imports from the EU and Singapore are duty free. Over 80 per cent of US imports from Canada and Mexico are, too. Firms moved fast to nab those exemptions. Take Canada: pre-2025, the percentage of US imports from Canada that were compliant with the US-Mexico-Canada Agreement (USMCA) hovered around 40 per cent. Now? Nearly 90 per cent! Trump’s new 10 per cent global levy includes slightly more exemptions.
Global deal-making also muted the impact of tariffs. Examples include Canada and China’s electric vehicle agreement; US deals with China, Japan, India, Taiwan and more; the UK and EU; the EU and India, Latin American trade bloc Mercosur and others; the UK and India. Investors can expect more.
The widely feared tariff that many investors expected was not just delayed. It is simply not coming. Stocks saw that quickly last year, when few fathomed it. Trump’s threats have had ever less effect since then. See Greenland. Or his October China threats. Or all of February’s bluster. The ACWI keeps hitting new highs through it all, March’s brief drop notwithstanding. Markets know tariff fear is greater than the actual impact. For stocks, tariff tumult and terror ended by mid-2025. It is now old news.
Trump’s tariff gyrations will continue. But their fear is already in prices. Stocks have moved on. Don’t let his future vacillations tarnish your bullishness.
