Fisher Investments Reviews Whether Investors Should Fear Tariffs

Tariffs Haven’t Derailed Trade

Tariffs can certainly have negative repercussions for certain industries and individual companies. However, we believe many investors underestimate the ability for companies to come up with creative solutions to get around tariffs—or at least limit their impact.

We saw this dynamic play out in varying ways during the previous Trump and Biden administrations. Both administrations pursued more hawkish trade policies, threatening and implementing a variety of tariffs over that time. However, as Exhibit 1 demonstrates, global trade volumes rose unevenly despite tariffs and threats. Some product categories were affected more than others but the key takeaway, in our view, was that global trade volumes were largely unaffected. The notable exception was 2020’s COVID-era, which was unrelated to tariff activity.

Exhibit 1: Global Trade Has Navigated Tariffs Before

Source: CPB Netherlands Bureau for Economic Policy Analysis, as of 2/4/2025. Merchandise world trade volumes, seasonally adjusted, monthly, 12/31/2016 – 11/30/2024.

Will Tariffs Sink Global Trade?

Over the past six years, we’ve seen rising tariffs and trade restrictions under Biden and Trump, yet world trade didn’t collapse. As Exhibit 2 shows, international trade’s share of world GDP has been largely range bound since 2008 and remains higher than prior decades. Although world trade has seemingly plateaued as a percentage of global GDP in recent years, its total value has climbed—in both nominal and inflation-adjusted terms.ⁱ

Any dips in global trade in recent decades are aligned with broader periods of economic turbulence—such as the 2008 Great Financial Crisis and 2020’s pandemic-driven government lockdowns—not tariffs or trade disputes.

Exhibit 2: Merchandise and Services’ Share of Global GDP

Source: World Bank, as of 1/24/2025. Merchandise Trade and Trade In Services as a % of GDP from 12/31/1975 – 12/31/2023.

A Nuance of Global Trade—Services Growing in Importance

Much of the talk about tariffs today center around goods and materials, but it’s important to note the services component of global trade has become increasingly important. Examples of services trade include tourism, financial services, legal services, software development and more. It’s unclear how—or if—tariffs could be applied to many of these categories. For example, 50% of trade in services are in digital services—comprised of communications services, information technology support and more (Exhibit 3). Many of these services are unlikely to be subject to tariffs—reducing their potential scope.

Exhibit 3: Composition of World Services Imports

Source: International Monetary Fund, Balance of Payments Statistics Yearbook, as of 1/24/2025. Annual data from 1/1/1982 – 1/1/2022.

Tough Tariff Talk or Walk?

Despite what some hope and others fear, tariff proposals are uncertain to become policy. Consider that in President Trump’s first term, tariff threats were seemingly part of a negotiating tactic for trade agreements. Often, the tariffs would be reduced or eliminated altogether as a deal came together.

We’ve already seen examples of this in 2025. In late January, President Donald Trump proposed—and then quickly suspended—tariffs on Colombia after striking a migrant deportation deal with the Colombian president. Shortly after, President Trump announced tariffs on Canada, Mexico and China but then quickly suspended tariffs on the former two after they pledged support to aid certain policies on immigration and a crackdown on illegal imports of certain drugs.

Additionally, while there are some tariffs the Trump administration can place unilaterally—under national defense, for example—there are constraints on presidential powers that prevent enforcing sweeping tariffs without legislative backing. Depending on which tariffs the Trump administration actually seeks to impose—and on which country—tariffs by executive order could potentially be subject to lengthy legal disputes. This allows stocks plenty of time to pre-price any potential impact long before they take effect.

Today, investors must wait and see whether threatened tariffs come to fruition, and if so, evaluate them based on their scale and scope. While tariffs—however unlikely—could negatively impact global markets in the short-term, history tells us most lack the power or longevity to derail the global economy or stock markets in a meaningful way.

Want to Dig Deeper?

In this article, we discussed how potential tariffs could impact global trade and markets. For further discussion on what tariffs would mean for the global economy, you can read Fisher Investments’ MarketMinder article, “Why Tariff Threats Call for Patience—Not Panic.”

To learn more about the potential stock market impact of tariffs, you can watch our video, “Fisher Investments Reviews the Potential Impact of Tariffs.”

For additional commentary on tariffs being used as negotiating tactics, you can read Fisher Investments’ MarketMinder article, “The Trump Tariff Turnabout.”

For more market insights from Fisher Investments, read our latest articles.

Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. The results for individual portfolios and for different periods may vary depending on market conditions and the composition of the portfolio. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.

ⁱSource: World Bank, as of 1/24/2025.