Trump's Tariff Policy: Market Impact and Investment Strategy

As of April 2025, President Donald Trump has implemented a comprehensive tariff policy called “Trump’s Tariff Policy”, which significantly impacts global trade. The reciprocal tariff increases imposed by the United States (U.S.) are substantial and pose risks to several sectors, particularly trade and investment.  

Trump has introduced a baseline universal tariff of 10% on imports from trade partners. China has levied the highest reciprocal tariff at 145%, followed by Vietnam at 46%, Cambodia at 49%, and Indonesia at 32%.

This development raises important questions: What is the Trump effect on investment? Is this tariff policy ultimately beneficial or harmful? Let's explore these issues further in the article below.

What is Trump’s Tariff Policy?

Trump’s tariff policy aimed to protect American industries by imposing higher import taxes on goods, especially from countries with large trade surpluses. The policy sparked global trade tensions and market volatility (impacting asset investment), and retaliation from several countries.'

10% Universal Tariff

The baseline tariff policy generally imposes a minimum tariff of 10% on all imported goods into the United States, with adjustments depending on trade surplus or deficit conditions. This 10% universal tariff was enacted on 5th April 2025 for most imported goods, except for Mexico and Canada.

Country-Specific Increases

Under Trump's tariff policy, certain countries have been subjected to higher, country-specific tariff rates. These include:

• China with the highest tariff rate at 145%,

• Cambodia at 49%,

• Vietnam at 46%,

• Indonesia at 32%, and

• The European Union at 20%.

Tariff Pause Announcement

In response to international pushbacks, a 90-day suspension of higher tariffs was announced. However, China is excluded from this temporary pause.

The Impact of Trump’s Tariff Policy on Investment Assets:

Trump’s tariff hike policy has triggered market turmoil, including the investment markets such as:

1. Stocks

On 2nd April 2025, the announced 10% tariff increase significantly shook the global economy, causing the worst two-day losses in the history of the U.S. stock market, totaling USD 6.6 trillion before the market closed for the weekend.

For the stock exchanges, the Nasdaq index dropped by 11.4%, followed by the Small Cap 2000 (-10.7%), S&P 500 (-10.5%), and Dow Jones (-9.3%), all within just two trading days. That indicates that financial market players in the U.S also negatively received the reciprocal tariff policy.

Not only did this Trump effect impact the U.S. markets, but it also spread across global stock exchanges, including Asia, though with more varied patterns. The Chinese market remained relatively stable, as seen in the Shanghai Composite's slight drop of only 0.4% and the China A50 showing virtually no movement.

2. Foreign Exchange

Several countries which are the key trading partners of the United States and emerging market currencies responded to the tariff measures with varied reactions. According to Reuters, the U.S. dollar weakened against major currencies such as the Japanese Yen and the Euro. The Chinese Yuan experienced the steepest depreciation due to the ongoing trade war.

Global investors shifted toward safer currencies such as the Japanese Yen (JPY)  and Swiss Franc (CHF), which have shown relative appreciation against the USD. These currency movements reflect growing concerns regarding broader economic implications in foreign exchange (forex) markets.

Safe-haven assets attracted investors seeking liquidity and stability amid escalating volatility in global markets. As a precautionary measure, traders and investors flocked to reallocate capital into safer currencies.

3. Commodity Markets

Commodity markets faced sharp price swings, with metals showing the most notable instability. This was driven by Trump's decision to impose tariffs to boost domestic production, which led to substantial initial pressure and inflationary effects.

Trump's tariff policies have made commodity investments more volatile than traditional securities. Several factors influence the value of commodity-based derivatives beyond tariffs, including commodity index volatility, interest rate shifts, and even extreme weather events and climate change.

Although these policies challenge investment prospects, such volatility can also present unique opportunities for active traders.

What Should Investors Do?

Although Trump’s tariff policy has raised concerns, there are still several strategic steps that investors can consider protecting their assets. While risk cannot be entirely eliminated, it can be mitigated through the following approaches.

1. Diversify Globally and Across Asset Classes

Geographic and asset class diversification can help cushion against U.S. centric trade volatility. Consider allocating to international equities, multi-asset funds, or emerging markets which are less impacted by the U.S. tariffs.

2. Watching FX Risks and Opportunities

Currency fluctuations will likely be more pronounced - especially in emerging markets. Investors should explore hedged ETFs or other FX instruments if their portfolios are exposed to volatile currencies such as CNY, INR, or MXN.

3. Adjust Portfolios Early

Proactive investors are encouraged to make early portfolio adjustments and leverage data analytics to gain more profound and comprehensive insights into shifting market sentiment. When approached strategically, uncertainty surrounding Trump's tariff policy decisions can become an opportunity.

4. Find Hidden Opportunities

Market price declines can present lucrative opportunities, especially for those with surplus or idle funds. Such downturns can offer favorable entry points to acquire assets at discounted prices.

5. Hedging Strategies

Hedging strategies are vital in managing currency risk, particularly for international companies. Hedgers can use options, forward contracts, or futures to mitigate currency volatility.

In this context, foreign exchange (forex) market participants must continuously adjust their positions and anticipate shifts in the global market landscape.

Read also: Is Gold Worth Investing in 2025?

Is Trump’s Tariff Policy Considered Good or Bad?

Trump's decision to implement reciprocal tariff hikes has sparked various reactions from several countries. The move imposes significant economic burdens, and economists agree that it is a poor decision that can hinder countries from reaping economic benefits.

This policy generally hurts global investment products, especially in the short term. However, for investors who can navigate market volatility, there are opportunities to diversify their portfolios and invest in safe-haven assets such as safe-haven currencies (JPY, USD, CHF), gold, and other alternative investments that you can consider through.