Foreign investors continue to show robust confidence in U.S. equities, defying expectations that President Trump’s latest tariff measures would trigger a broad retreat. After a sharp market dip in April amid fears of escalating trade conflicts, data now indicates that international allocations to U.S. equities have surged to more than 30% of total U.S. financial assets through June, well above the long-term average of 19%. The resilience of U.S. stocks highlights the market’s ability to absorb geopolitical and trade-related shocks while maintaining appeal to global investors.

Tariffs, Market Resilience, and Corporate Adaptation

The initial “Sell America” panic in April, triggered by the announcement of Trump’s so-called “Liberation Day” tariffs, saw equities, Treasurys, and the dollar all tumble in tandem—a rare market dislocation. However, corporate adjustments and policy nuances quickly softened the impact. Citi estimates that the U.S. effective tariff rate now stands at roughly 9%, half of the theoretical 18%, as companies leveraged carve-outs, transshipments, stockpiling, and margin management to mitigate the effects.

Market participants have noted that tariff news has had a more muted impact than anticipated, as firms across sectors demonstrated resilience in absorbing levies. Tech-heavy indices, in particular, have benefited from both structural growth and investor preference, offering a compelling alternative to international equities that lack comparable exposure to technology-driven returns.

Interest Rates, Policy, and Currency Dynamics

Monetary policy and macroeconomic indicators have played a critical role in sustaining foreign interest in U.S. equities. Declining interest rates and renewed optimism about U.S. growth have created a supportive environment for risk-taking, offsetting some of the uncertainty introduced by trade conflicts. While rhetoric from President Trump targeting Federal Reserve Chair Jerome Powell raised concerns over central bank independence, investors largely maintained their equity positions rather than shifting entirely to traditional safe havens such as Treasurys or the dollar.

International equities initially outperformed U.S. stocks by as much as 17% in early 2025, aided by European stimulus programs and currency tailwinds. However, as the dollar stabilized, the comparative advantage of foreign markets waned, narrowing the performance gap to roughly 10%.

Looking Ahead: Strategic Allocation and Market Outlook

Investors are taking a measured approach, balancing confidence in U.S. equities with selective international exposure as a hedge. Analysts emphasize that the concentration of high-growth technology companies in the U.S., alongside supportive fiscal policies and a Fed willing to cut rates, reinforces the underlying appeal of American markets. Currency stability and continued adaptability among U.S. firms suggest that foreign investors may maintain or even increase allocations despite ongoing tariff risks.

As 2025 progresses, the key indicators to watch include tariff developments, Fed policy decisions, and sector-specific corporate performance. Maintaining a strategic allocation that considers both macroeconomic trends and geopolitical uncertainty will be critical for investors seeking to navigate a complex and evolving landscape.

Category (not included in article): Market Review