This week, the U.S. ramped up its use of tariffs on imported goods, and other countries have responded with their own trade barriers. For years, global trade had been moving toward fewer tariffs, so this shift has people wondering: is this just a short pause in globalization, or a bigger change in direction?

Globalization has helped fuel strong U.S. stock market performance and has kept inflation in check for decades. Now, with uncertainty about trade policies growing, markets have been rattled. Some traders are selling off assets they bought based on guesses about where government policies were headed. But history shows that what really drives the market over time is economic growth and company profits—not short-term political decisions.

In today’s nonstop news cycle, it’s easy to react to headlines, but individual investors are better off sticking with long-term strategies. Diversifying—spreading investments across industries and regions—is still the best way to handle market ups and downs.

Tariffs, at their core, are taxes on imported goods. Governments use them for various reasons—protecting local industries, punishing foreign policies they don’t like, or addressing national security concerns. After the Second World War, many countries agreed to reduce tariffs and promote global trade through deals like the General Agreement on Tariffs and Trade (GATT). Since then, some have reversed course, adding more tariffs to boost their domestic industries. The number of new tariffs globally jumped from 239 in 2012 to 2,845 in 2023.  The U.S. has used tariffs for a long time—going back to 1789. More recently, in 2018, the U.S. slapped tariffs on $360 billion worth of Chinese goods, and added even more in 2023 on things like steel, semiconductors, and electric vehicles.

These broad stroke reciprocal tariffs are unsettling but in our opinion yesterday was an opening volley which will precede longer term negotiations.  Look at it this way, the U.S. doesn’t grow bananas!

For you as an investor, the bottom line is to focus on the long term. Stay diversified, know your goals, and don’t let short-term noise derail your strategy. We are here to keep you on track and minimize risk and anxiety. This too will pass.