Tariff Truce Reshapes Global ETF Landscape as Emerging Markets Surge Past Developed Peers

The Vanguard FTSE All-World UCITS ETF is treading water at 157.80 euros, a stone’s throw from yesterday’s 52-week high of 158.54 euros, as investors weigh the durable impact of a one-year-old trade truce that has quietly realigned the global equity landscape. The fund slipped to 157.06 euros in Wednesday’s session, barely denting a 21% annual gain that leaves it up roughly 8% since January.

That rally owes much to the landmark tariff compromise struck on 12 May 2025 between Washington and Beijing. The deal slashed US duties on Chinese goods to 30% and Chinese levies on US products to 10%, a drastic reduction that stabilised supply chains and lifted sentiment across international markets. The détente proved especially potent for emerging economies: the index tracking world equities excluding the US delivered a 32.6% return last year, versus just 18% for the American market alone.

China’s weighting in the ETF remains modest at roughly 3%, but its influence stretches far beyond that narrow allocation. Economists have already raised their growth forecast for the country to 4.4% for 2026, underpinned by a softer US dollar and robust fundamentals. The broader emerging-market rally appears to have room to run, and the fund’s 4,200-stock portfolio — spanning both developed and developing nations — stands to capture the shift.

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The fund’s composition, however, still reflects the dominance of US technology. IT stocks account for a quarter of the underlying index, with Nvidia, Microsoft, Apple and Amazon occupying the top slots. These heavyweights are acutely sensitive to Sino-American trade dynamics because of their deep supply-chain exposure. The tariff truce has offered some relief, but the Federal Reserve’s cautious stance on rates and lingering high energy prices continue to strain the broader equity backdrop.

The legal landscape shifted again in February 2026, when the US Supreme Court struck down older punitive tariffs. In response, the Trump administration announced a new flat 10% levy on Chinese imports — a paradoxically lower burden than the original duties. That ruling effectively reset the tariff baseline and set the stage for a planned summit between President Donald Trump and President Xi Jinping in mid-May. Negotiators are currently huddling over AI governance guidelines and agricultural purchases, with an extension of the current tariff truce high on the agenda.

For the Vanguard fund, which oversees $57 billion in assets and charges a rock-bottom 0.19% expense ratio, the tariff détente has reinforced the case for global diversification. The ETF uses an optimised sampling technique to hold a representative slice of the index, cutting transaction costs on small or illiquid stocks. Dividends are automatically reinvested, compounding the advantage.

Yet the truce may prove fragile. Washington is preparing fresh import tariffs on Chinese goods for the second half of 2026, and Beijing is expected to retaliate. The fund’s broad geographic spread — the US makes up roughly two-thirds of the portfolio, Japan and the UK follow — provides a natural buffer against such regional shocks. With the emerging-market growth story accelerating and the dollar showing signs of weakness, the Vanguard FTSE All-World is navigating a more complex but potentially more rewarding terrain than it did during the peak of the trade war.

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