Trump Tariffs Missed the Reindustrialization Target—But GE and Deere Gained as Market Focused on AI and Earnings

One year ago, on April 2, 2025, President Donald Trump declared a national emergency on foreign trade, dubbing it "Liberation Day." The policy's core promise was to force trading partners to the negotiating table by slapping steep, country-specific tariffs on imports, with the ultimate goal of reducing the U.S. trade deficit. The initial market reaction was a textbook panic: a global sell-off gripped various asset classes, triggering a "Sell America" trade as U.S. equities, Treasuries, and the dollar all took a major hit.

The policy's stated goal was clear, but its outcome was underwhelming. Despite the administration's boast of creating "maximum negotiating leverage," the results were few and far between. In the subsequent year, just seventeen trade deals were concluded, with most finalized before the U.S. Supreme Court struck down the emergency tariff authority in late February. The promised "ninety deals in ninety days" fizzled into a modest tally, leaving the core trade deficit challenge largely unresolved.

Yet, the broader market has shown remarkable resilience. Over the past year, the S&P 500 has risen by an impressive rate of 16%, outperforming its long-term average of 10%. This climb has occurred despite the policy's volatility and the initial fears it sparked. The market's path has been driven by factors beyond trade policy, including corporate earnings strength, a resilient economy, and investors' ability to adapt to a shifting tariff landscape. The policy failed to deliver on its promise of economic independence, but the market's forward view has been shaped by a different calculus-one that looks past the immediate trade friction to the underlying fundamentals.

Assessing the Policy's Economic Impact

The policy's tangible outcomes reveal a story of diminished trade, stalled manufacturing, and a diluted economic shock. The most direct impact was on flows. U.S.-China trade volumes collapsed, with imports from China falling 30% and exports to China sliding by over 25% over the past year. This dramatic decoupling, as one economist noted, is unlikely to reverse quickly. Yet, this was not a story of domestic production filling the gap. Despite the promise of a manufacturing revival, early indicators tell a different tale. Between April and December 2025, manufacturing employment dropped by 77,000 jobs, while construction spending and private fixed investment also declined. The HCSS report concluded there had been "no revival of American manufacturing," calling broad tariffs a "blunt and unreliable instrument."

The policy's initial force was also significantly blunted by exemptions. The administration's early claims of a sweeping 21.5% tariff rate were quickly undermined. By the time of the Supreme Court's ruling, the effective "reciprocal" tariff rate had fallen to 13.6%, and a staggering 43% of U.S. imports avoided any tariff in 2025. This created a complex landscape where companies scrambled for exemptions, fueling a surge in tariff-related lobbying that reached levels not seen in years. The result was a policy that raised costs for some but failed to deliver the broad-based industrial boost it promised.

The burden fell unevenly on corporate America. While some industrial stocks like GE and Deere outperformed the market, they did so while grappling with direct tariff costs. 3M estimated its 2025 earnings were hit by $0.20 to $0.40 per share, with a potential $850 million annualized impact. Deere projected tariff costs would double to $1.2 billion this year, while GE said the duties would cost over $500 million. These are real frictions that pressure margins and investment, even as the broader market looks past them. The bottom line is that the policy reshaped trade but did not reindustrialize the nation, leaving a legacy of higher costs and uncertainty rather than the promised economic independence.

Market Winners, Losers, and Valuation

The policy's intended beneficiaries have shown a mixed picture. While the goal was to boost domestic manufacturing, the performance of industrial stocks tells a story of selective winners and underwhelming results. GE Aerospace shares have risen 44% over the past year, and Deere & Company shares have gained 21%, both outperforming the broader market. Yet, 3M Company shares were broadly flat, underperforming the S&P 500's 17% gain. This divergence suggests the tariff windfall was not a broad industrial revival but a story of specific firms navigating the new trade landscape, often while shouldering significant direct costs.

The true market winners, however, were found far from the factory floor. The top-performing stock in the S&P 500 over the past year is Sandisk, which has surged 1,200%. Its explosive growth is a pure play on the AI infrastructure boom, highlighting how the market's focus has shifted to technology and demand-driven sectors rather than trade policy. This performance underscores a key point: the policy failed to redirect capital toward manufacturing, but it did not stop the market from rewarding companies at the forefront of the next technological wave.

More broadly, the initial post-tariff rally has clearly faded. The S&P 500 is now down 3.53% year-to-date, indicating that the market's forward view has moved beyond the policy's early volatility. The focus has turned to current earnings, economic data, and the trajectory of interest rates, not the unresolved trade deficit. The valuation of the index itself, while not detailed here, is now being tested by this new reality of a more cautious, post-rally environment.

Catalysts and Risks for the Next Phase

The market's resilience over the past year has been built on adaptation and a focus on fundamentals beyond trade. The forward view now hinges on a few critical catalysts and risks that will determine if this stability holds or if the policy's headwinds re-emerge.

The Supreme Court's strike down of the emergency tariff authority in late February was a major legal setback. Yet, the administration appears determined to push the agenda forward through other means, as noted by experts. This creates a period of uncertainty where the future of the tariff regime is in limbo. The key risk investors must watch is the potential for tariffs to contribute to higher consumer prices, which would pressure both corporate margins and consumer spending. Early signs are emerging, with Amazon's CEO reporting that tariffs are starting to creep into some prices on its marketplace. If this trend accelerates, it could trigger a feedback loop where higher costs erode demand, dampening the very economic growth the policy sought to boost.

Leading indicators for the next phase are clear. First, look for new trade deal announcements. The administration's track record of sealing deals has been underwhelming, with just seventeen concluded over the past year and all finalized before the Supreme Court ruling. Any new agreements would signal a return to the negotiating table and could provide a temporary relief valve for markets. Second, monitor shifts in the effective tariff rate. The complex web of exemptions has already diluted the initial impact, with the effective "reciprocal" tariff rate falling to 13.6% by the time of the court's decision. Any significant change in this rate, either up or down, would be a direct signal of the policy's evolving strength.

The bottom line is that the market's path forward will be shaped by the interplay of these factors. The policy's legal foundation is weakened, but its economic and political momentum may persist. Investors should watch for signs that the tariff-driven price pressure is becoming systemic and for any new diplomatic breakthroughs that could alter the trajectory. The past year showed the market can look past volatility; the next phase will test whether it can adapt to a more persistent and costly reality.