Trump Tariffs Fuel 18% Surge in International Stocks, S&P 500 Lags at 7.8%

The tariff measures implemented by Donald Trump have significantly boosted the international stock market, potentially ending the global dominance of the S&P 500 index, at least for now. This year, the international stock market is expected to outperform the U.S. stock market benchmark index for the first time since 2022 and the first time in a bull market since 2009. The primary reason is the concern that tariffs and trade uncertainty will have an excessive impact on the profit growth of U.S. companies.

By 2025, the MSCI World ex-U.S. index has surged 18%, while the S&P 500 index has only risen 7.8%. The performance of individual stocks reveals the underlying reasons. Mexico's main stock index has risen 18% this year, Canada's by 12%, Germany's by 21%, Spain's by 26%, Brazil's by 14%, and the UK's by 11%.

This contrasts sharply with the strong rise in the U.S. stock market over the years, which has been primarily driven by large technology companies and promises of artificial intelligence, while their global counterparts have performed relatively weakly. This makes stocks outside the U.S. relatively cheaper.

“Sometimes the biggest gains come from recovery investment opportunities,” said the chief strategist of a Canadian investment management firm. According to the strategist's analysis, the valuation gap between the U.S. and international markets has always been wide, with investors over-allocating to the U.S. market and under-allocating to other markets. This trend has begun to reverse this year and may accelerate as Trump's tariff measures take effect this month. Meanwhile, trading partners in Canada, Europe, and Japan are implementing reforms favorable to investors and boosting domestic growth.

“The speed of market change is crucial. Overall, international markets seem to be becoming more investor-friendly,” the strategist said. “The U.S. remains the gold standard, but if the gap narrows, the valuation gap may also narrow.”