Have Stocks Become Resilient to News of Tariffs?
Stocks are almost as high as they have ever been despite the looming problem of more tariffs that slightly drove down prices last week.
Quick overview
- The stock market remains near record levels despite new tariff news that could potentially impact stock prices.
- Historically, tariffs agreed upon with Mexico and Canada tend to be higher than the actual tariffs due to the USMCA agreement.
- Investors should not be overly concerned about new tariffs, as the market has shown resilience and stability.
- Both the U.S. and China are likely to resolve their trade disputes quickly, maintaining their profitable trade relationship.
The stock market is trading at near record levels even though there is new tariff news that could cause stock price drops across the board. Are stocks showing immunity to tariff news?
Throughout 2025, stocks have fallen dramatically when new tariff developments have been reported, with President Donald Trump’s tariff moves causing significant decline in early parts of the year. However, with the threat of new tariffs on the horizon, the stock market is still very high, and that could mean that investors have little to fear from new tariff actions.
Historically, the agreed upon tariffs for Mexico and Canada- two for the United States’ biggest trade partners, tends to be higher than the actual tariffs. That is because of USMCA, which makes trade among these three countries beneficial to all of them. So, the countries can agree on a tariff that seems high, but the USMCA document helps to make the tariff lower to appease trade partners.
As fears escalate in the stock market over how high the new tariffs may be, investors should keep in mind that unless a USMCA exemption is made, the proposed tariffs will not hit as hard as they might seem to at first glance.
Are Chinese Tariffs Still a Problem?
Investors may also worry about the ongoing trade dispute between China and the United States. How will that affect stock prices? What we have seen this year is that the two countries are eager to work together. The U.S. wants a few things from China related to fair trade and border security, and China wants to keep up its very profitable trade with the United States. The countries’ leaders may spew angry remarks to reporters and over the internet, but then they tend to come to an agreement that does not seem nearly as harsh as the original proposition.
China and the United States are rivals in some ways, but they both need the trade that the other country offers. They are likely to work out their tariff issues in short order, as we have already seen so far this year.
Should Investors Worry?
As new tariffs were announced for numerous countries last week, the stock market still traded at near record highs. The Dow Jones closed off Friday at a loss of 0.63%, which was still well above its three-month average. The Dow has rarely been higher the entire year.
The Nasdaq Composite is also performing well, as it closed down 0.22% for Friday but it is still almost at a record high and doing better than it was at the start of 2025.
The S&P 500 fell 0.33% on Friday, trading close to all-time highs and significantly better than its early 2025 performance. With all three indices doing well, investors should not have to worry that the market will crash with the news of new tariffs or the fact that those tariffs will likely go into effect soon. The market is in a strong and stable position that will allow it to weather this tariff storm just fine.
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