If you’ve been following the news, you’re likely aware of the ongoing tariff discussions in Washington, D.C. and their impact on the markets. The constant shifts in policy and responses can leave investors feeling whipsawed, so we wanted to provide some historical context on what past tariff actions have meant for market performance.
A Look Back: Major Tariff Actions in the Last Century
While history doesn’t guarantee future results, examining past tariff actions can offer insight. Over the last 100 years, there have been seven major tariff events. Interestingly, all but two resulted in positive market performance in the 12 months following implementation. Here’s a brief overview:
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1930: Smoot–Hawley Tariff Act ↓↓↓
Enacted at the onset of the Great Depression, this act led to a sharp decline in global trade. The S&P 500 suffered a significant downturn, mirroring the broader economic collapse. -
1962: Trade Expansion Act ↑
This act gave the President authority to negotiate tariff reductions to promote trade. The S&P 500 responded positively, reflecting market confidence in expanded trade opportunities. -
1974: Trade Act of 1974 ↓↓
Implemented during an era of high inflation and an oil crisis, this act coincided with a market downturn in the subsequent 12 months. -
1988: Omnibus Foreign Trade and Competitiveness Act ↑↑
Aimed at addressing trade imbalances, this tariff action took place during a period of economic expansion. The S&P 500 recorded gains in the following year.. -
2002: U.S. Steel Tariffs ↑
The imposition of these tariffs initially led to market volatility, but the S&P 500 rebounded over the following 12 months, demonstrating resilience amid a broader economic recovery. -
2018: First Trump Tariffs ↑
Focused on Chinese imports, these tariffs resulted in increased market volatility. However, despite short-term declines, the S&P 500 recovered and achieved gains over the following year. -
2025: Second Trump Tariffs ↓
The most recent iteration has already caused a notable impact, with the S&P 500 falling over 10% from its February highs. The long-term effects remain uncertain as markets react to ongoing trade tensions.
Uncertainties and Key Considerations
Tariffs introduce several unknowns that could shape market responses:
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Substitution Effects and Long-Term Industry Impact
Industries such as aerospace (Boeing) and agriculture (soybeans) may experience shifts in demand as global supply chains adjust. -
Economic Uncertainty
Tariffs create uncertainty, affecting both market sentiment and business decision-making across the country. Key questions include:-
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What is the ultimate goal—tax revenue, job creation, or something else?
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How many revisions, retractions, and policy shifts will occur before a stable resolution is reached?
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Market Correction or a Normal Cycle?
Given the stellar market performance in 2023 and 2024, could this be a natural correction rather than a direct result of tariffs?
Stay Informed
Markets will continue to react as trade policies evolve. If you’d like to review your portfolio strategy in light of these developments, we’re here to help. Schedule a one-on-one review with us.
Understanding historical trends can help put today’s market fluctuations into perspective, but proactive planning is key. Let’s navigate these changes together.
