Trade wars and tariffs aren't just news headlines – they can hit your retirement account too. When former President Donald Trump launched tariff battles (especially during 2018–2019), the resulting stock market volatility impacted the 401(k) plans of millions of U.S. workers. In this friendly guide, we'll explore Trump's tariffs' impact on retirement savings and explain how the stock market and Trump tariffs moved together. We'll look at what happened during his first presidency (2017–2021) and the latest developments in 2025, focusing on how sectors like technology, healthcare, manufacturing, and energy – common in 401(k)s – performed. Finally, we'll offer simple tips for retirement planning during trade wars so beginner investors can safeguard their nest egg in uncertain times.
Trump's Tariffs and the Stock Market Relationship
Between 2018 and 2019, the U.S. engaged in a major trade war – most notably with China – under President Trump. Tariffs (import taxes) were announced, delayed, increased, and sometimes paused. Each twist in policy often sent the stock market on a roller coaster ride. For example, when new tariffs were announced or trade talks broke down, stock prices fell; when negotiations resumed or deals seemed likely, stocks bounced back. This uncertainty put markets "on edge" and led to a spike in volatility (big swings in stock prices up and down).
To put it in perspective, the S&P 500 (a broad U.S. stock index) actually ended 2018 down about 4%. Much of that decline came late in 2018, when tariff worries and other factors caused a near bear-market dip (almost -20% from the peak). But in 2019, once investors saw progress toward a trade truce (the "Phase I" deal), stocks roared back – the S&P 500 surged by over 31% that year. In fact, U.S. stocks went from a loss in 2018 to one of their best gains in decades in 2019. This whiplash showed how quickly markets can recover after tariff tensions ease. History doesn't repeat, but it often rhymes: staying calm through the turbulence proved beneficial for patient investors.
Even intra-day news had effects. A single tweet or announcement could send the Dow Jones down hundreds of points. For instance, in one August 2019 episode, an escalation of the trade war (China devaluing its currency in response to U.S. tariffs) prompted the Dow to plunge 767 points (about 2.9%). Headlines like "tariffs rattle stock markets" were common as investors tried to digest what each development meant for corporate profits and economic growth. The key takeaway: tariff news brought short-term volatility, but long-term impacts on market fundamentals were less clear once the dust settled.
401(k) and Trump Tariffs: Effects on Retirement Accounts
If you have a 401(k) through your job, it's likely invested in mutual funds or stocks that mirror the overall market. So, when tariffs swung stock prices, 401(k) balances often fluctuated in tandem. During the height of the trade war in late 2018, many workers saw a temporary dip in their retirement savings. In fact, the average 401(k) plan balance fell about 8% over 2018 – from roughly $104,300 at the end of 2017 to $95,600 by the end of 2018. This was largely due to the market downturn in the fourth quarter of 2018, when trade fears and other factors hit stocks.
Average 401(k) balances dipped in 2018 amid tariff turmoil, then hit new highs after the trade truce in 2019. In late 2017 (pre-trade-war) the average 401(k) balance was about $104k, dropped to about $96k after the 2018 market slide, and rebounded to $112k by the end of 2019. This illustrates how staying invested through volatility can pay off when markets recover.
The good news is that those losses were short-lived for investors who stayed the course. As noted, 2019 saw a strong rebound – and with it, 401(k) balances hit record highs. By Q4 2019, the average 401(k) balance was up to $112,300, a 17% increase from the prior year. In one year, the downturn had been erased but retirement accounts grew even larger. In other words, if you didn't panic-sell your 401(k) investments during the trade war volatility, your account likely recovered and even gained by the time a U.S.-China trade deal was in sight.
It's also worth noting that throughout the turmoil, most 401(k) participants "stayed the course." Fidelity Investments found that during late 2018's volatility, over 98% of 401(k) savers continued contributing and only a tiny fraction stopped or moved out of stocks. This is encouraging – it means many people remembered that 401(k) investing is for the long run. Those who kept their contributions flowing and didn't make rash changes were rewarded when the market bounced back in 2019.
Which Sectors Felt the Tariff Impact?
Tariffs don't hit all industries equally. 401(k) plans usually hold a mix of sectors (tech, healthcare, manufacturing, energy, etc.), so it's useful to see how each fared during the trade war. Here's a breakdown:
- Technology: Big tech companies are a huge part of the stock market and many 401(k) funds. During the trade war, tech stocks were volatile. Many tech firms rely on global supply chains and China as a market, so tariff headlines swung their stock prices. In 2018, the tech sector ended roughly flat (just about -0.3%) – not bad considering the market drop, but there were scary moments (for example, chipmakers and Apple fell on tariff news). Once a trade truce was on the horizon, tech took off – in 2019 the S&P 500 tech sector rocketed by about 50%, leading the market's gains. This huge 2019 rally in tech stocks helped many 401(k)s recover strongly, since funds holding Apple, Microsoft, and other tech names saw big boosts.
- Manufacturing/Industrials: Manufacturing companies (think automakers, heavy equipment, machinery) were directly in the crosshairs of tariffs. U.S. tariffs on steel and aluminum drove up input costs, and China's retaliatory tariffs hurt U.S. exporters of industrial goods. As a result, industrial stocks struggled in 2018 – this sector fell by over 13% that year. Many well-known industrial firms saw stock declines as investors feared higher costs and disrupted supply chains. But in 2019, as trade tensions eased, industrials rebounded roughly 25–30% (tracking the broader market upswing) and recouped their losses. Still, their 2019 recovery, while strong, wasn't as spectacular as tech's.
- Healthcare: Healthcare stocks (pharmaceuticals, medical device makers, health insurers) were relatively steady through the trade war. Why? This sector is less directly exposed to tariffs – people need healthcare regardless of tariffs, and many healthcare companies are more domestic-focused. In 2018, healthcare was actually one of the rare sectors with a positive return (+6% or so). It acted as a defensive haven when trade news got ugly. In 2019, healthcare stocks did rise, but only modestly (around 20%, which lagged behind the broader S&P's nearly 29% gain). Other issues (like potential drug price regulations) capped healthcare gains that year. For 401(k) investors, healthcare holdings provided some stability when more trade-sensitive stocks were swinging.
- Energy: The energy sector (oil and gas companies, etc.) had a rough ride. Tariffs on industrial goods and a slowing global economy led to concerns about oil demand, which hurt energy prices. In late 2018, oil prices plunged and energy stocks dropped sharply – the energy sector was the worst performer in 2018 at about -18%. So, 401(k) funds with energy exposure saw that piece of the portfolio shrink. In 2019, energy shares rebounded only slightly (on the order of +10% for the year), making energy the laggard of 2019's rally.
Overall, this mix of sector performances meant that a diversified 401(k) (which likely holds a bit of everything) saw some parts of the portfolio buffer the losses of others. For example, in 2018, gains in healthcare stocks helped offset some of the drops in industrials and energy. In 2019, nearly all sectors were up, but if your fund was heavy in tech it probably did exceptionally well. The key point for investors: diversification across sectors in your 401(k) helps reduce risk when specific industries get hit by tariffs or other shocks.
2025 Update: New Tariffs Revive Market Jitters
Fast forward to 2025, and tariffs are back in the news. In this new chapter, President Trump (in a hypothetical second term) and major trading partners are once again exchanging trade blows. The result? A déjà vu of volatility. By April 2025, the trade war escalation had "spurred the biggest market losses since the pandemic". Global stocks tumbled after China retaliated against a fresh round of U.S. tariffs. The tech-heavy Nasdaq Composite fell into a bear market (down over 20% from its peak), and the Dow Jones Industrial Average slid into a correction (down over 10%). Investors were reminded that trade conflicts can still pack a punch: Trump's new tariffs drove U.S. tariff levels to their highest in over a century, causing a "plunge in world financial markets".
For 401(k) holders, early 2025's turbulence likely caused a noticeable but (we hope) temporary dip in account balances. Just as in 2018, sectors responded differently. Technology stocks, which had been high-flyers, bore the brunt of the sell-off (hence the Nasdaq's drop), while some defensive areas held up a bit better. If your retirement portfolio was well-diversified and you resisted the urge to make panicked moves, you have already applied a key lesson from the last trade war. It's uncertain how long the new tariff dispute will last, but experienced investors know that reacting emotionally to short-term market swings can do more harm than good. In the next section, we'll summarize some practical steps to manage your 401(k) during these turbulent times.
Retirement Planning During Trade Wars: Tips for 401(k) Investors
1. Think Long-Term: Remember that your 401(k) is a long-term investment for retirement. Trade wars and other crises will come and go. History shows that despite periodic drops, the market has trended upward over time. For example, those who stayed invested through the 2018 tariff turmoil saw their 401(k) balances recover and even hit new highs by the end of 2019. Try not to let short-term noise derail your long-term plans.
2. Don't Panic-Sell: It can be unnerving to watch your retirement savings dip due to headlines about tariffs. But selling everything during a downturn can lock in losses, and you may miss the subsequent rebound. The vast majority of 401(k) investors in 2018 wisely did not pull out of stocks. By staying put, they were in position to benefit when the market bounced back. As the saying goes, "time in the market beats timing the market."
3. Keep Contributing (Buy Low): If you're still working, continue your regular 401(k) contributions, even during trade-war volatility. In fact, those contributions are buying shares at lower prices during dips – which is a good thing! This strategy, known as dollar-cost averaging, means you accumulate more shares when prices are down, positioning you for bigger gains when markets recover.
4. Diversify Your Investments: A well-diversified 401(k) spreads money across many stocks and sectors, which helps soften the impact of any one sector's decline. In a trade war, maybe your manufacturing stocks are hurting, but your healthcare or utility stocks might be doing okay (or vice versa). If you invest in broad index funds or target-date funds (common in 401(k)s), you likely already have diversification working in your favor. Diversification is often called the only "free lunch" in investing – it reduces risk without sacrificing much return.
5. Rebalance If Needed: Big market movements can knock your asset allocation (the mix of stocks, bonds, etc.) out of whack. For instance, after a surge in stocks, you might suddenly have a higher percentage in stocks than you intended, or after a drop, maybe too little. Consider rebalancing your 401(k) periodically. Rebalancing means selling a bit of what went up and/or buying what went down to get back to your target mix. It forces you to "buy low, sell high" in a disciplined way. During extended volatility, rebalancing back to your strategic weightings can be a smart move.
6. Stay Informed but Avoid Hype: It's good to be aware of major policy changes like tariffs, as they can affect the economy and markets. However, avoid making knee-jerk changes to your 401(k) based solely on sensational headlines. Often, by the time news is widely reported and acted upon, markets have already adjusted. Make changes to your portfolio only as part of a considered plan, ideally in consultation with a financial advisor.
7. Adjust Risk as Retirement Nears: If you're a younger investor, you have decades to ride out market storms. You can afford to take volatility in stride and even be aggressive in stocks. If you're closer to retirement, however, you may want to ensure your portfolio is somewhat more conservative (for example, a higher percentage in bonds or stable value funds) so that a trade war in the year you retire doesn't significantly derail your plans. It's about finding the right balance for your risk tolerance and time horizon.
Conclusion
The saga of "401(k) and Trump tariffs" underscores a classic investing lesson: markets will have storms, but they also have a reliable history of recovery. Tariff-driven volatility in the late 2010s gave many retirement savers a scare, yet those who stayed calm saw their savings rebound and grow. Now, with new trade disputes in 2025 creating uncertainty, the same principles apply. By maintaining a diversified portfolio, continuing contributions, and focusing on the long run, you can turn short-term volatility into an opportunity rather than a setback. Trade wars are just one of many challenges your 401(k) might face on the road to retirement. With a solid plan and steady resolve, you can navigate these challenges and keep your retirement goals on track.