Tariff Fallout Hasn’t Hit Markets Yet. Issuers Say That Could Change

As if we needed more tariff turmoil.

Strategists from some of the world’s top asset managers are now cautioning investors about a possible market slowdown in the second half of 2025 as the effects of President Trump’s tariff policy spread through the broader economy. Experts from Vanguard, BlackRock, Allianz and Invesco are keeping a close eye on growth as the added costs from levies on foreign goods drive up prices in the US. While timing the markets is anyone’s guess, the potential of higher inflation could push investors into derivative-based products, like buffered ETFs, to hedge against a market dip, according to Charlie Ripley, vice president of portfolio management at Allianz.

“The impact from tariffs will be a meaningful pickup of inflation that has yet to show up in the hard data sets,” he said. “Our perspective on the direction of travel for equity markets, first and foremost, includes a wider range of outcomes.” 

Big, Beautiful Buzzkill

Inflation is one thing, but it’s not the only issue keeping economists up at night. Trump’s recently passed tax and spending bill should have a marginally positive impact on the economy as Americans consume more over the next few years, Ripley said. “On the other hand, the increase in spending is going to have to be funded somehow and despite the run-up in rates we have already seen, the supply and demand picture for long-dated Treasurys could keep upward pressure on yields,” he told ETF Upside. 

If tariffs do drive up inflation, the Fed will have its hands tied on any further interest rate cuts. Finding a consensus among a divided Fed could also prove difficult as long as inflation is looming, Ripley added. The good news:

• Employment data continue to be robust, which would likely translate to an environment of “normalized” returns for the stock market, he said. 
• Allianz is “skeptical” overall of a meaningful slowdown. 

“We recognize that things could change quickly with the current administration with global trade and geopolitics remaining as top risks,” Ripley said.

Let’s All Play Nice. There are other key global trends that could loom large over the second half, too, including restrictive immigration policies here at home and investments moving into the defense sector in Europe, said Brian Levitt, a global market strategist at Invesco. “These dynamics suggest a more inflationary environment and moderated growth outlook for the US in 2025, relative to earlier expectations,” Levitt said in a recent outlook, adding that global markets may also wane. However, a “constructive resolution of trade tensions” could sustain markets through the end of the year.

Here’s to hoping.