Should You Keep Investing During a Trade War?

Purple Flower

Markets are wobbling, tariff headlines are everywhere, and your portfolio might be showing red. So should you stop investing?

Global trade tensions are back in a big way. The US has imposed tariffs on goods from dozens of countries, the UK is navigating a 10% blanket tariff on exports to America, and the knock-on effects are rippling through stock markets worldwide. If you're an investor - or thinking about becoming one - the noise is hard to ignore. But the question worth asking isn't "what are tariffs doing to markets?" It's "what should I actually do about it?"

What's actually happening with tariffs right now?

The US currently applies a 10% tariff on most UK goods entering America. Certain sectors face steeper charges - the auto industry has been hit with a 25% tariff, which has rattled carmakers and parts suppliers across Europe. Meanwhile, trade negotiations between major economies keep shifting, with announcements, reversals, and new threats arriving almost weekly.

For UK investors, the direct impact depends on what you own. Companies that export heavily to the US may see squeezed margins. Domestically focused UK businesses are less directly affected, though the broader economic uncertainty can weigh on sentiment across the board.

Trade wars create noise. Your job as an investor is to separate the noise from the signal.

How do tariffs affect the stock market?

Tariffs increase costs for businesses that trade internationally. When a UK company exports goods to the US and faces a 10% tariff, either the company absorbs that cost (lower profits) or passes it to the customer (potentially lower sales). Either way, the market tends to reprice those companies downward in the short term.

But stock markets also factor in expectations. Much of the tariff impact gets priced in quickly once announcements are made. The real damage usually comes from prolonged uncertainty, where businesses can't plan, investment gets delayed, and consumer confidence drops. That's the scenario that genuinely hurts long-term returns.

What does history tell us about investing during trade disputes?

Trade tensions are nothing new. The US-China trade war that escalated in 2018-2019 caused significant market volatility. The FTSE 100 dropped roughly 12% in late 2018 as tariff fears peaked. But investors who stayed the course saw a full recovery within months, and those who continued investing through the dip bought shares at lower prices that later proved very profitable.

Going back further, markets have weathered oil embargoes, currency crises, Brexit uncertainty, and a global pandemic. In every case, the investors who came out best were those who kept investing consistently rather than trying to time their exit and re-entry.

Time in the market beats timing the market. This isn't just a cliche - it's backed by decades of data.

Should you change what you're investing in?

If you hold a diversified portfolio - spread across different sectors, geographies, and asset types - you already have some built-in protection against trade disruption. A global index fund, for example, gives you exposure to thousands of companies across dozens of countries. If US tariffs hurt one sector, gains elsewhere can offset the damage.

What you probably shouldn't do is panic-sell everything and move to cash. Selling after a market drop locks in your losses. You'd then need to decide when to get back in, and getting that timing right is extraordinarily difficult, even for professional fund managers.

If anything, trade uncertainty makes diversification more important, not less. If your portfolio is heavily concentrated in one country or sector, this is a good moment to review whether you're carrying unnecessary risk.

Is now actually a good time to invest?

Counterintuitively, periods of market uncertainty can be excellent times to invest. When markets dip due to fear and uncertainty, you're buying assets at lower prices. If you invest regularly through a strategy like pound-cost averaging (putting in the same amount each month regardless of what markets are doing), dips actually work in your favour. You buy more shares when prices are low and fewer when prices are high, which lowers your average cost over time.

The FTSE 100 has delivered solid returns in 2026 despite the tariff backdrop. Many UK-focused companies are trading at reasonable valuations precisely because global investors are nervous. For long-term investors, nervousness in the market often creates opportunity.

What if you're just starting out?

If you haven't invested before and the headlines are putting you off, that's completely understandable. But consider this: every generation of new investors has faced a reason not to start. In 2020 it was a pandemic. In 2022 it was inflation and rising rates. In 2016 it was Brexit. The investors who started anyway, with small, regular contributions into diversified funds, have overwhelmingly been rewarded.

Starting with £25 or £50 a month into a global index fund inside an ISA is a perfectly solid approach, trade war or no trade war. You're not betting on next month's tariff announcement. You're investing in the long-term growth of the global economy.

The best time to start investing was years ago. The second-best time is now, regardless of the headlines.

What's the worst thing you can do?

The worst thing you can do is nothing driven by fear. Leaving your money in a current account earning close to zero while inflation erodes its value is a guaranteed loss. At least with investing, you have the potential for real growth over time. Cash feels safe, but over a decade, inflation quietly destroys its purchasing power.

The second-worst thing is panic-selling. Markets recover. They always have. But you only benefit from the recovery if you're still invested when it happens. Selling at the bottom and buying back at the top is the most expensive mistake an investor can make.

Where Mona Fits

Mona makes it easy to invest consistently, even when markets feel uncertain. Setting up a regular monthly investment into a diversified portfolio means you benefit from pound-cost averaging automatically. You don't need to watch the news or time your trades. Mona's ISA wrapper means your returns are completely tax-free, so you keep every penny of growth when markets recover.

The Bottom Line

Trade wars create short-term volatility, but they don't derail long-term investment returns. History shows that investors who stay the course through periods of uncertainty consistently outperform those who try to time the market. The smartest response to tariff headlines isn't to stop investing - it's to keep going, stay diversified, and let compounding do its work over years and decades.

Don't let tariff headlines derail your financial future. Start or continue investing with Mona today.

For impartial information and guidance on investing during market volatility, visit MoneyHelper.org.uk.

Join Mona’s early access waitlist

Join the waitlist

All articles

Should You Keep Investing During a Trade War?

Purple Flower

Markets are wobbling, tariff headlines are everywhere, and your portfolio might be showing red. So should you stop investing?

Global trade tensions are back in a big way. The US has imposed tariffs on goods from dozens of countries, the UK is navigating a 10% blanket tariff on exports to America, and the knock-on effects are rippling through stock markets worldwide. If you're an investor - or thinking about becoming one - the noise is hard to ignore. But the question worth asking isn't "what are tariffs doing to markets?" It's "what should I actually do about it?"

What's actually happening with tariffs right now?

The US currently applies a 10% tariff on most UK goods entering America. Certain sectors face steeper charges - the auto industry has been hit with a 25% tariff, which has rattled carmakers and parts suppliers across Europe. Meanwhile, trade negotiations between major economies keep shifting, with announcements, reversals, and new threats arriving almost weekly.

For UK investors, the direct impact depends on what you own. Companies that export heavily to the US may see squeezed margins. Domestically focused UK businesses are less directly affected, though the broader economic uncertainty can weigh on sentiment across the board.

Trade wars create noise. Your job as an investor is to separate the noise from the signal.

How do tariffs affect the stock market?

Tariffs increase costs for businesses that trade internationally. When a UK company exports goods to the US and faces a 10% tariff, either the company absorbs that cost (lower profits) or passes it to the customer (potentially lower sales). Either way, the market tends to reprice those companies downward in the short term.

But stock markets also factor in expectations. Much of the tariff impact gets priced in quickly once announcements are made. The real damage usually comes from prolonged uncertainty, where businesses can't plan, investment gets delayed, and consumer confidence drops. That's the scenario that genuinely hurts long-term returns.

What does history tell us about investing during trade disputes?

Trade tensions are nothing new. The US-China trade war that escalated in 2018-2019 caused significant market volatility. The FTSE 100 dropped roughly 12% in late 2018 as tariff fears peaked. But investors who stayed the course saw a full recovery within months, and those who continued investing through the dip bought shares at lower prices that later proved very profitable.

Going back further, markets have weathered oil embargoes, currency crises, Brexit uncertainty, and a global pandemic. In every case, the investors who came out best were those who kept investing consistently rather than trying to time their exit and re-entry.

Time in the market beats timing the market. This isn't just a cliche - it's backed by decades of data.

Should you change what you're investing in?

If you hold a diversified portfolio - spread across different sectors, geographies, and asset types - you already have some built-in protection against trade disruption. A global index fund, for example, gives you exposure to thousands of companies across dozens of countries. If US tariffs hurt one sector, gains elsewhere can offset the damage.

What you probably shouldn't do is panic-sell everything and move to cash. Selling after a market drop locks in your losses. You'd then need to decide when to get back in, and getting that timing right is extraordinarily difficult, even for professional fund managers.

If anything, trade uncertainty makes diversification more important, not less. If your portfolio is heavily concentrated in one country or sector, this is a good moment to review whether you're carrying unnecessary risk.

Is now actually a good time to invest?

Counterintuitively, periods of market uncertainty can be excellent times to invest. When markets dip due to fear and uncertainty, you're buying assets at lower prices. If you invest regularly through a strategy like pound-cost averaging (putting in the same amount each month regardless of what markets are doing), dips actually work in your favour. You buy more shares when prices are low and fewer when prices are high, which lowers your average cost over time.

The FTSE 100 has delivered solid returns in 2026 despite the tariff backdrop. Many UK-focused companies are trading at reasonable valuations precisely because global investors are nervous. For long-term investors, nervousness in the market often creates opportunity.

What if you're just starting out?

If you haven't invested before and the headlines are putting you off, that's completely understandable. But consider this: every generation of new investors has faced a reason not to start. In 2020 it was a pandemic. In 2022 it was inflation and rising rates. In 2016 it was Brexit. The investors who started anyway, with small, regular contributions into diversified funds, have overwhelmingly been rewarded.

Starting with £25 or £50 a month into a global index fund inside an ISA is a perfectly solid approach, trade war or no trade war. You're not betting on next month's tariff announcement. You're investing in the long-term growth of the global economy.

The best time to start investing was years ago. The second-best time is now, regardless of the headlines.

What's the worst thing you can do?

The worst thing you can do is nothing driven by fear. Leaving your money in a current account earning close to zero while inflation erodes its value is a guaranteed loss. At least with investing, you have the potential for real growth over time. Cash feels safe, but over a decade, inflation quietly destroys its purchasing power.

The second-worst thing is panic-selling. Markets recover. They always have. But you only benefit from the recovery if you're still invested when it happens. Selling at the bottom and buying back at the top is the most expensive mistake an investor can make.

Where Mona Fits

Mona makes it easy to invest consistently, even when markets feel uncertain. Setting up a regular monthly investment into a diversified portfolio means you benefit from pound-cost averaging automatically. You don't need to watch the news or time your trades. Mona's ISA wrapper means your returns are completely tax-free, so you keep every penny of growth when markets recover.

The Bottom Line

Trade wars create short-term volatility, but they don't derail long-term investment returns. History shows that investors who stay the course through periods of uncertainty consistently outperform those who try to time the market. The smartest response to tariff headlines isn't to stop investing - it's to keep going, stay diversified, and let compounding do its work over years and decades.

Don't let tariff headlines derail your financial future. Start or continue investing with Mona today.

For impartial information and guidance on investing during market volatility, visit MoneyHelper.org.uk.

Join Mona’s early access waitlist

Join the waitlist

All articles