Trump’s Tariff Impact & Global Market Trends: February 2025 Market Update
Table of Contents
Trump’s Tariff Impact & Global Market Trends: February 2025 Market Update
6 Mar 2025
The Reality of a Donald Trump Presidency
Markets had been euphoric about what a Trump presidency might bring—lower taxes, deregulation, and an "America First" agenda. But February brought a harsh reality check. Tariffs, geopolitical uncertainty, and government program cuts fueled inflation concerns, leaving investors with a case of buyers’ remorse.
U.S. equity markets continued their slide, falling 1.3% in February. However, this was offset by strong performances in Asian and European markets, lifting global stocks by 2.5% for the month.
*Source: Factset: Kōura returns are pre-tax and post-fees. Returns over 12 months are annualised. Local market returns use the relevant markets indices; NZ Equities uses NZX50 index; US Equities uses S&P500 index; Rest of World uses MSCI EAFE Index; Emerging Markets uses MSCI Emerging Markets Index, Fixed Interest uses Bloomberg Aggregate NZ Composite Bond Index. Bitcoin return is the USD change in price of Bitcoin. The return for an Aggressive Portfolio represents the equivalent of 95% growth and 5% income assets investing in core Kōura Funds. The return for a Growth Portfolio represents the equivalent of 80% growth and 20% income assets by investing in core Kōura Funds. Returns are calculated by Kōura.
*Past performance is not a reliable indicator of future performance. Returns are not guaranteed, and investment values may fluctuate over time.
Trump’s Tariff Crusade
Trump is doubling down on tariffs, but the endgame remains unclear. Are they a high-stakes poker play for leverage, or an actual effort to boost government revenue? Likely, it’s a mix of both.
This month’s announcements included:
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Retaliatory tariffs – U.S. tariffs on countries that impose tariffs on American goods.
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Steel and aluminum tariffs – A push to revive U.S. manufacturing.
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25% tariffs on Canada and Mexico – Back on the table.
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China tariffs climbing from 10% to 20%.
Uncertainty is becoming just as damaging as the tariffs themselves. Businesses are scrambling—front-loading supply chains, rushing spending, and delaying capital projects. With policy direction shifting weekly, executives are finding it impossible to plan ahead.
Europe Outperforms
Europe had a standout month, with the Euro Stoxx Index climbing 3.4%, bringing its YTD gain to 10%—outperforming the U.S. market for the first time in years.
What’s driving the surge?
- Valuation gap – European stocks trade at 18x earnings vs. 26x in the U.S.
- Ukraine peace prospects – European energy prices could soon return to pre-2022 levels.
- Defence spending boom – Increased military budgets are proving stimulatory.
That said, history warns against getting too excited about Europe. It’s had brief outperformance before but sustaining it has been elusive.
NZ Reporting Season: Bleak but Not All Bad
New Zealand companies struggled this earnings season, with major disappointments from Spark, Fletcher Building, and the energy sector. The standout disaster? Ryman Healthcare’s $1 billion capital raise—its second in just a few years.
However, one bright spot emerged: A2 Milk. A turnaround in China has driven a significant boost in profitability, giving the company new momentum.
Is China Finally Investable Again?
Hong Kong’s market has soared 15% YTD, fueled by Beijing’s newfound support for private tech firms. A key moment? Xi Jinping is hosting a meeting with China’s tech giants—including Jack Ma, previously sidelined—to reaffirm their importance to the economy.
Additionally, Beijing has propped up its banking sector with a $50 billion support package. While China faces structural headwinds—aging demographics, a tech cold war with the U.S., and ongoing trade disputes—the government’s recent policy pivots could mark the beginning of a turnaround.
Inflation: The Beast Awakens
Just as inflation seemed tamed, it’s creeping back. February saw rising inflation in the U.K., U.S., and Australia, with both the U.K. and U.S. topping 3% again. Markets have swiftly adjusted, pushing out expectations for rate cuts.
Parallels to the 1970s stagflation era are emerging. Back then, inflation peaked in 1974, cooled, and then spiked again in 1976—forcing even harsher rate hikes. Today, with geopolitical tensions rising and global trade fragmenting, the risk of sustained inflation is growing.
Bitcoin’s Wild Ride
After peaking at $106,000 on Trump’s Inauguration Day, Bitcoin tumbled to $85,000 by month-end. Two key factors drove the drop:
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Risk-off sentiment in the U.S. – Nervousness in the tech sector is spilling into crypto.
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No U.S. Strategic Bitcoin Reserve… Yet – Hopes that the U.S. government would start buying Bitcoin have faded, at least in the short term.
Still, a 20% drop is minor in Bitcoin terms. If history is any guide, another rally could be just around the corner. Investors should expect—and embrace—this level of volatility.
Conclusion: Buckle Up
It’s a tough time to be an investor. Trump’s policy chaos is fueling uncertainty, growth is slowing, and inflation is back on the rise. 2025 was always expected to be a wild ride, and February confirmed it.
The best advice right now? Turn off the news, stick to your strategy, and stay the course. Volatility will only increase, but long-term investors know that discipline wins in the end.
*Bitcoin is highly volatile and not suitable for all investors. Before investing part of your KiwiSaver balance in the Bitcoin fund, ensure you fully understand the risks associated with cryptocurrencies: https://shorturl.at/U6Mkp, and/or consider seeking financial advice.
*The views and opinions expressed in this article are those of Rupert Carlyon. This content is for informational purposes and should not be considered financial advice. Before making any financial decisions, consider consulting a financial adviser.