The S&P 500 (SNPINDEX: ^GSPC) has traded sideways this year, while the iShares MSCI ACWI ex US ETF (a benchmark for global markets outside the United States) has advanced about 10%. The S&P 500 has not underperformed that badly in 30 years, according to Charles Schwab strategist Kevin Gordon.
What’s behind the mismatch? High valuations and concerns about President Trump’s policies have pushed investors away from U.S. stocks, and Trump recently doubled down on his tariffs strategy.
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Last year, President Trump invoked the International Emergency Economic Powers Act (IEEPA) to impose tariffs ranging from 10% to 50% on goods imported from most countries. He also used Section 232 of the Trade Expansion Act of 1962 to impose tariffs on various products and sectors, including steel, aluminum, cars, auto parts, and lumber.
Last week, the Supreme Court struck down the IEEPA tariffs, ruling the president had exceeded his authority. But Trump promptly announced a 10% global tariff (that he raised to 15% a day later) using Section 122 of the Trade Act of 1974. The Budget Lab at Yale estimates the average tax on U.S. imports before and after the Supreme Court ruling at 16% and 13.7%, respectively.
Here’s the big picture: President Trump has replaced IEEPA tariffs with similar ones. While Section 122 duties expire after 150 days unless Congress extends them, they still buy Trump time to impose more permanent tariffs under Section 301 of the Trade Act of 1974, which requires thorough investigations.
Studies conducted by several institutions — the Congressional Budget Office (CBO), the Federal Reserve Bank of New York, the Kiel Institute, and the National Bureau of Economic Research — have arrived at the same conclusion: U.S. businesses and consumers have paid the vast majority of President Trump’s tariffs, with most research putting the figure around 90%.
Why does that matter? Each dollar in tariffs the government collects from U.S. businesses and consumers is money that could have been spent elsewhere to support the economy. That means gross domestic product (GDP) will be lower than it otherwise would have been had tariffs never been imposed, according to the CBO.
The drag on economic growth is already showing up in data. In 2025, the U.S. economy added only 181,000 jobs, the lowest number (excluding the pandemic) since 2009. And the economy expanded just 2.2%, the slowest growth (excluding the pandemic) in a decade. Meanwhile, PCE inflation (the Federal Reserve’s preferred measure) hit 2.9% in December 2025, the highest reading since March 2024.
