“Delays are IROPs, or Irregular Operations,” explained a kind Delta stewardess named Penny on my recent flight from New York to Birmingham. Irregular or not, very few experiences build character quite like a three-hour delay, a dead phone battery, and a middle seat on a packed plane.
Much like flight delays, tariffs tend to arrive abruptly and with plenty of disruption. Through the end of February, the S&P 500 cruised at a reasonable altitude, up 1.2% year to date with a 12-month return of 16.8%. But later, following tariff policy news in March and April, the S&P 500 steeply descended and ended April 30 with a -5.3% year-to-date drawdown. Much like disgruntled passengers, investors were left refreshing their screens, anxiously awaiting updates and wondering whether anyone knew when things would get moving again.
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“The market volatility around tariffs was probably justified. Uncertainty spiked higher and that left investors to revisit assumptions about the new administration’s priorities. We started the year optimistic over a return of manufacturing and renewed small- and mid-cap business investment,” says Scott Helfstein, senior vice president, head of investment strategy for Global X.
Still, in early 2025, there was also sufficient guidance about the prospects for tariff negotiations and how they may impact markets in the short run. “Ongoing tariff negotiations leave many unanswered questions, adding to uncertainty in the markets,” said Greg Davis, Vanguard president and chief investment officer, in a column in February. “But uncertainty is nothing new. We should look at uncertainty beyond its potential for volatility; it also highlights opportunities to either mitigate risk or generate alpha.”
Steve Dean, chief investment officer for Compound Planning, adds, “History suggests that over time, politics do not significantly influence market returns, but in the near term investors often react strongly to proposed government policies.”
How the Stock Market Reacts to New Tariffs
There’s also precedent for how the U.S. market has performed following the advent of tariffs. The Smoot-Hawley Tariff Act of 1930, for example, raised duties on 20,000 imports by an average of 20%. While these tariffs did not cause the Great Depression, some historians suggest they exacerbated further market declines and stymied the eventual rebound.
The so-called 2018-2019 trade war raised duties on $370 billion of Chinese goods from an average of 3% to 19%, and prompted Chinese retaliation that raised tariffs on U.S. exports from 7% to 21%, according to data from J.P. Morgan. By the end of 2018, the S&P 500 had declined by 4.2%.
History shows examples of both resiliency and devastation in the wake of tariffs. Here are a few examples, based on data compiled by NYU Stern:
Smoot-Hawley Tariff Act of 1930
While this infamous law can’t be blamed for all of the market turmoil that followed, stocks were so badly beaten down that a full, sustainable rebound took years. The S&P 500 lost 8.3% in 1929, 25.1% in 1930, 43.8% in 1931 and another 8.6% in 1932.
Although the 1930s saw a few big up years as well (the S&P surged 50% in 1933 and 46.7% in 1935), an investor who put $100 into the S&P 500 at the beginning of 1929 would’ve still been underwater by the end of 1943.
Trade War of 2018-2019
Stock market rebounds 31.2% in 2019, 18% in 2020 and 28.5% in 2021.
15 Worst Days for the S&P 500
What’s more, the worst 15 days in the market, or the S&P 500, in the last 50 years yielded drawdowns ranging from -20.5% on Black Monday, Oct. 19, 1987, to -12% during the COVID-19 sell-off on March 16, 2020. In the same time period, the average decline during all the worst 15 market days was -8.9%. One year after the worst 15 drawdown days, however, the average rebound was 30.9%, according to research from BlackRock.
Effect of Recent Tariffs on Today’s Markets
Global X’s Helfstein remains optimistic about market returns in the coming years, as well. “Tariffs were always only one part of the policy puzzle. We were also focused on taxes and deregulation. Both have the potential of unleashing animal spirits,” Helfstein remarks. He adds, “Over the long term, businesses will continue to improve and drive valuations higher with profitability. Being underinvested and missing the upswing can be more risky than riding out the downturn.”
For the back half of 2025, Michelle Cluver, head of model portfolio solutions at Global X, suggests that a second look at investment opportunities outside of the U.S. is warranted. “We’re at another point of transition, improvements in the trade negotiations have reduced expectations for a U.S. recession. Rolling back these expectations has boosted U.S. market performance recently while strengthening the USD. This is an area we’re continuing to monitor as we assess the attractiveness of international versus U.S. markets,” says Cluver.
Takeaway
Tariffs, plane delays and market volatility have more in common than most people may think. Each arrive without much of a warning, cause widespread grumbling and inevitably lead to stress-eating pretzels. But just like an overbooked flight that somehow still gets you to your destination (albeit with a neck cramp), markets, too, have a way of pulling through uncertainty about a range of topics, including tariff policies.
So, buckle up, stay calm and remember: Turbulence is usually temporary, and long-term investing, much like air travel, is about staying seated and letting the pilots — or the portfolio managers — do their jobs.
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A Look Back at How Markets Have Performed After New Tariffs originally appeared on usnews.com
