Trump tariffs: Challenges and opportunities for small businesses

12/2/24 •

Summaries by topic

• English

The Trump administration's potential tariffs on imports from countries like China and Mexico are expected to impact the ETF market. While financials and regional banks have seen positive performance, investors are seeking diversification away from China, particularly to Emerging Markets ex-China ETFs. The overall ETF market is anticipated to exceed $1 trillion in flows this year, driven by strong equity market performance and a shift in investor focus related to the new administration's policies.

Financial Sector Performance

• 00:00:51 Financials and regional banks experienced positive reactions after the election due to expectations of deregulation and increased M&A activity. ETFs like KBE, KBWB, and KRE, which hold regional banks, have performed well as a result of the Trump trade, with investors anticipating a less-hawkish regulatory environment.

Emerging Market ETFs

• 00:04:05 Investors are diversifying away from China-focused Emerging Market ETFs due to concerns about potential tariffs. ETFs focusing on Emerging Markets excluding China, including India, Taiwan, and Vietnam, have seen increased inflows. This shift reflects a broader investor strategy to minimize risk associated with potential trade wars.

ETF Inflows

• 00:01:54 ETF inflows are expected to exceed $1 trillion for the first time in a calendar year, exceeding the previous record of $991 billion in 2021. The strong performance of the equity markets, coupled with investor rebalancing and hedge fund activities, is contributing to the substantial inflows, particularly in broad market ETFs like SPY and IVV.

Impact of Tariffs

• 00:03:43 President-elect Trump's discussion of tariffs on Chinese and Mexican imports is influencing ETF activity. While the Mexico ETF has seen a relatively muted reaction, there's been a notable shift towards Emerging Markets ex-China ETFs. The potential implications of trade policies remain uncertain, and the market's response will depend on the actual implementation of tariffs.