Growth of $1 During President Trump’s First Term January 2017–December 2020

Source: Dimensional Dimensional Fund Advisors

Tariffs are back in the headlines, and investors may be wondering: What does this mean for the markets? Given the past market reactions to trade tensions, it’s worth taking a step back before making any investment decisions.

A great example comes from President Trump’s first term (2017–2020), a period when China was frequently targeted by U.S. trade policies. Many investors at the time assumed that Chinese equities would suffer. However, as the chart above shows, China’s equity market (MSCI China Index) actually outperformed both the S&P 500 and developed markets outside the U.S. over that period.

Basing an investment strategy on simplistic cause-and-effect reasoning can be costly. Tariffs were widely expected to hurt Chinese equities, yet those who built portfolios around this assumption would have missed out on China's market outperformance during Trump’s first term. Markets constantly adjust to new information, and what seems like an obvious trade is often already priced in.

Rather than reacting to headlines, investors should focus on building a resilient portfolio that aligns with their financial goals, risk tolerance, and time horizon. If you are unsure, a financial adviser can help construct and oversee a disciplined investment approach—one that avoids emotional reactions and remains focused on long-term success.

Markets will always fluctuate, but a well-structured strategy, not short-term speculation, is what ultimately drives returns.