Donald Trump’s tariff threats are dominating the headlines, but relative market calm suggests investors think Trump’s bark is worse than his bite.
It’s not that investors are unmoved. Shares in car makers such as Ford, General Motors and Volkswagen all fell following recent Trump threats, only to rally when the US president delayed tariffs on Canada and Mexico. Apple shares dipped following reports that China would retaliate by announcing an investigation into the iPhone maker, while China’s antitrust investigations into Google and Nvidia are also being noted by analysts.
Nevertheless, investors don’t seem unduly bothered by what the Wall Street Journal describes as the “dumbest trade war in history”. The S&P 500 remains near all-time highs. Wall Street’s fear index, the Vix, has dipped in 2025, and remains well below historical norms. European stocks are outperforming.
With Trump, it’s “not clear what is meant to be policy vs a negotiating tactic”, says Research Affiliates’ Que Nguyen. Market calm suggests investors see the threats as a negotiating tactic, and that countries need not make damaging concessions to Trump – they can offer something superficial that he can sell as a win.
Perhaps, but there are risks.
Firstly, a market reaction might have given Trump pause on tariffs, but a market shrug offers him no reason to hold back. Secondly, damage is done even if threats aren’t carried out; a US that blows hot and cold is, plainly put, an unreliable partner.
Thirdly, both Research Affiliates and Goldman Sachs caution that policy uncertainty eventually leads to lower valuation multiples. A sustained period of uncertainty could surely test market complacency.
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