Trump administration tariffs reshape global markets

President Donald Trump is turning frequent tariff talk into tangible action. Throughout the summer and early fall, he implemented detailed tariff policies on U.S. imports from many nations, sharply increasing duties compared to longstanding trade practices. On October 10, U.S.-China trade tensions escalated as both countries imposed additional sanctions. China will restrict rare earth exports beginning December 1, while President Trump responded by threatening a 100% tariff rate and announcing software export controls starting November 1.

Higher tariffs’ full economic impact remains uncertain. Investors are questioning whether these changes will slow corporate profit growth, accelerate consumer inflation, weaken the labor market, or trigger a combination of effects. April’s initial tariff announcements caused a significant stock market decline, but equities have since rebounded. As the President clarifies his tariff plans by country and industry, markets have softened recently but remain near all-time highs, signaling continued confidence in the economy's overall direction.

Trump's 2025 tariff polices remain in effect

Most U.S. trading partners now face higher tariffs, including the largest exporters. Some tariffs are already in effect, but negotiators have not finalized all terms, and the administration could change agreements before they complete implementation and secure congressional approval in many cases. Nevertheless, America’s biggest trading partners now face much higher tariffs than before President Trump’s second term began.

Negotiations with three of the U.S.’s four largest trading partners, Mexico, China, and Canada, are ongoing, but the administration is already charging these countries higher tariff rates than in 2024. The U.S. continues talks with Taiwan, including a separate review of advanced semiconductors and electronics. The administration has resumed tariff negotiations with India after unilaterally raising rates to 50%, citing India’s continued Russian oil purchases and the administration’s desire to end the Russia-Ukraine war.

The U.S. and China continue to clash over trade negotiations. On October 9, China announced it will curb rare earth metal exports beginning December 1 and restrict battery manufacturing equipment starting November 8. These actions could harm U.S. manufacturers of computer chips, defense equipment, and battery technology. On October 10, President Trump threatened to impose new 100% tariffs on Chinese imports starting November 1. President Trump and President Xi of China intend to meet at the Asia-Pacific Economic Cooperation summit in Seoul on October 31–November 1 but escalating rhetoric may jeopardize their meeting.

U.S. tariff rates projected to reach highest levels since 1934

The administration continues to determine applicable tariff rates for countries and specific goods, but U.S. government tariff collections on imported goods have increased more than fourfold this year.

The Yale Budget Lab estimates that consumers could eventually face an average effective tariff rate of nearly 18% on imported goods – the highest effective U.S. tariff rate since 1934 ¹ – based on what’s been announced so far by the Trump administration.

Legal challenges could derail President Trump’s tariffs

Unlike traditional trade agreements, administration officials are negotiating deals that directly implement tariffs on trading partners without seeking Congressional ratification. While Congress has delegated some tariff-setting authority to the executive branch, states, importers, small businesses, and advocacy groups have challenged the legality of President Trump’s tariffs in court.

President Trump cites the International Emergency Economic Powers Act (IEEPA) to justify bypassing Congressional approval for many new tariff plans. In late August, a Federal Circuit appeals court upheld the Court of International Trade’s May decision that certain tariffs exceed the President’s authority, but the tariffs remain in effect during the appeal process. The Supreme Court has agreed to hear the administration’s appeal, consolidating two separate tariff lawsuits. Oral arguments begin November 5, and the court will ultimately rule on President Trump’s unilateral tariff strategy.

If the Trump administration loses its Supreme Court appeal, it may pursue alternative legal options, including:

• Key provisions of the 1974 Trade Act:
  • Section 201, which empowers the president to impose tariffs if the International Trade Commission finds import quantities are injuring domestic manufacturers. ²
  • Section 301, which allows the U.S. Trade Representative to issue tariffs to address unfair trade practices. The first Trump Administration previously used this provision to investigate and impose tariffs on China and the European Union. ³
  • Section 122, which permits a temporary 15% tariff when the U.S. faces a trade deficit with other countries. Congressional approval is required to extend Section 122 tariffs beyond 150 days.
• Section 338 of the 1930 Tariff Act, which allows the President to impose up to 50% tariffs on countries that discriminate against U.S. commerce.
• Section 232 of the 1962 U.S. Trade Expansion Act, which grants the president authority to impose tariffs or quotas on specific products or industries if the Commerce Secretary finds that import conditions “threaten to impair” national security. ⁴
• Congressional action, which historically approves trade agreements and tariff rates, though passage could require significant time and is not assured given the narrow Republican margins in Congress.

“While President Trump’s approach faces legal challenges, the current administration will likely retain tariffs in some form,” says Bill Merz, head of capital markets research with U.S. Bank Asset Management Group.

Economic impact of Trump's tariff polices remains limited

From February through April, investors expressed significant concern about the new tariff policy’s economic ramifications. Stocks declined, but equity markets quickly recovered, and by mid-summer, the S&P 500 hit a series of new all-time highs. Stocks dropped after President Trump criticized China’s trade stance and proposed higher tariffs on October 10, but they remain close to record highs. ⁵

“Since April, investors have moved away from the idea that tariffs would have a particularly detrimental impact on economic growth and corporate earnings,” says Merz. “Investor sentiment shifted to a much more positive stance in a short period.”

After a modest decline early in the year, the U.S. economy grew at a robust 3.8% annualized rate in the second quarter, as measured by Gross Domestic Product. ⁶ The unemployment rate remains low at 4.3%, as of August, as the on-going government shutdown delayed the September employment report. While inflation remains above the Federal Reserve’s 2% target, August’s 2.9% year-over-year pace matches the start of 2025. ⁷

Meanwhile, strong corporate earnings growth continues to drive equity market momentum. Since reaching its 2025 low on April 8, the S&P 500 has risen more than 33%. ⁸

Investors continue to capitalize on favorable environment

Resilient consumer spending and business investment benefit equity markets, and major companies continue to report strong profit growth. Investors remain concerned that higher tariffs could slow global activity and cause economic weakness, but so far, tariffs have not produced negative economic effects. Market fundamentals appear well-positioned for ongoing growth in the near-term pending Washington policies.

This may be an opportune time to connect with your wealth planning professional. Discuss your comfort level with your current portfolio in relation to ongoing economic changes, your personal objectives and your risk appetite.