Will tariff tumult ever cease?
U.S. President Donald Trump is considering an exit from the Canada-United States-Mexico Agreement (CUSMA) on trade. There are his Greenland-related threats. And the U.S. Supreme Court is about to rule on his tariffs. All three of these things rattle investors.
So, why didn’t tariffs feature heavily in my 2026 forecast? Because surprises move stocks most, and tariffs’ persistence and ubiquity make them old news for forward-looking markets. Their power over stocks is largely spent.
Hear me clearly: Tariffs are always bad – especially for the imposing nation, as the lag between U.S. stocks and world stocks in 2025 shows. When Mr. Trump unveiled his “reciprocal” tariffs early last year, their breadth, magnitude and bizarreness were a sharp downside surprise. So, U.S. stocks reeled, prepricing worst-case scenarios of tit-for-tat retaliation and deep hits to world trade.
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Those fears were overdone, for all the reasons I detailed in the wake of Mr. Trump’s “Liberation Day” tariffs – and more. Those reasons include: fraught tariff collection logistics, court challenges, transshipping, Mr. Trump’s deal-making obsession and countries striking new free trade agreements that exclude America.
The World Bank estimates that global trade grew 3.4 per cent in 2025. Even Chinese exports, among Mr. Trump’s chief tariff targets, rose 5.5 per cent, despite U.S.-bound shipments plunging.
Why? First, firms found workarounds. Chinese exports to southeast Asian economies boomed! In parallel, U.S. imports from the Association of Southeast Asian Nations leapt 36 per cent year-over-year in November. Coincidence? Ha!
Second, in last April’s column I noted that America’s Customs and Border Protection only had about 2,500 employees to monitor hundreds of entry locations. No surprise, then, that in the 2025 fiscal year, CBP performed just 465 audits – for more than 50 million shipments entering America!
CBP did upgrade some of its ancient software, helping gobble up $296-billion in duties – easily double the prior year. Sounds big! But that is just 6 per cent of America’s $4.8-trillion in annual goods imports.
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Yes, Canadian exports shrank year-over-year through November (the latest data available), largely due to a 13-per-cent decline in U.S.-bound shipments. But that belies huge jumps in exports to non-U.S. regions as companies adjusted. Canada’s exports to the European Union, China and Britain soared 38 per cent, 39 per cent and 60 per cent year-over-year through November, limiting the overall decline in exports to 3.1 per cent. Since Mr. Trump’s April shocker, they actually gained 6.3 per cent.
Fact: The globalized world can’t unwind fast. Few products come wholly from one nation. If a good is designed in Vancouver, built in China with parts from 20 different countries and using U.S. machinery, what is the nation of origin? What tariff rate applies? That is before transshipping and illegal tariff avoidance, which abound.
Yes, firms front-running the imposition of tariffs boosted 2025 trade. They foresaw levies and stockpiled! Hence, goods imports to the U.S. boomed at annualized rate of 52 per cent in the first quarter of 2025 as inventories surged. Then they tanked 35 per cent and 7 per cent annualized over the next two quarters. Canada’s exports to America leapt 15 per cent from October, 2024, through the following January – when Mr. Trump took office – then plunged 26 per cent through April.
Now, many analysts fear those stockpiles are running out. Don’t. Firms keep finding more ways to skirt tariffs.
In April, 2025, the World Bank estimated U.S. tariff rates averaged 28 per cent. An update in January cut that to 17 per cent. Go lower! With most 2025 receipts in, actual U.S. tariff rates average less than 10 per cent. That’s bad, but far better than initial fears.
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A big reason? Exemptions. Firms moved fast to nab them. Pre-2025, the percentage of CUSMA-compliant U.S. imports from Canada hovered around 40 per cent. Today? It’s nearly 90 per cent! More than half of U.S. imports from the EU and 80 per cent from Mexico are exempted, too.
Now, with Mr. Trump allegedly weighing quitting CUSMA, people fear its roughly $2.7-trillion in exemptions are at risk. Slow down! Nothing is official. Chatter may be another negotiating tactic ahead of renewal talks. Expect such noise throughout 2026 – stocks do.
Deal making also muted impact. There’s Canada and China’s electric-vehicle agreement. And U.S. deals with China, Japan, India, Taiwan and more. There’s also Britain and the EU, Britain and India, the EU and India, and the Latin American trade bloc Mercosur and others. Expect more!
Tariffs top pre-April levels - which is not great. But they’re far less than feared.
Hence, the widely-dreaded monster tariff hit many people expected wasn’t just delayed. It isn’t coming. Stocks saw that quickly last year, when few other analysts fathomed it. Mr. Trump’s threats had ever less effect since the initial shock. See Greenland. Or his October China threats. That is largely why the Toronto Stock Exchange boomed. Stocks know the bite from tariffs isn’t good, but their bark is worse.
The impending U.S. Supreme Court ruling won’t change that. Ruling against Mr. Trump limits presidential emergency powers. Good! But Mr. Trump can replace many tariffs on other grounds. Expect little change. If the court upholds tariffs, the status quo reigns. Which means no shock to stocks.
Tariff talk won’t vanish from headlines soon. But the fear is priced in now. Stay bullish.
Ken Fisher is the founder, executive chair and co-chief investment officer of Fisher Investments.