Uncertainty on Wall Street: will economic leadership change?

According to Natixis experts, Trump’s tariff policies and the withdrawal of international investors threaten to displace the U.S. as the global economic leader.

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U.S. stocks have underperformed compared to

  their global counterparts in 2025, as international investors are withdrawing from Wall Street to reinvest in Europe and China.

Natixis analysts believe that the main reason for this shift is the economic and foreign policies of Donald Trump, which could signal a lasting change in financial markets.

Impact of Trump’s Policy.

U.S. exceptionalism is being challenged, as Donald Trump’s tariff policy has created an environment of high uncertainty for multinational corporations listed in the U.S.

Higher tariffs represent a tax both for importers and U.S. consumers. Given that consumption accounts for nearly two-thirds of aggregate demand in the U.S., GDP growth could stagnate in the first half of 2025.

Thus, the U.S. economy could avoid a recession while consumers restrain their spending. Furthermore, the rising costs of developing generative AI, including electricity costs, have become a key concern for shareholders.

Challenges in the Tech Sector.

Most major tech companies have announced cuts to investment in data centers and AI capabilities. The growing competition from open-source AI models, such as Deepseek, presents a challenge for leading companies in the sector, forcing users to reconsider their dependence on these corporations.

Another sector at risk could be the semiconductor industry, especially if Chinese manufacturers continue to meet Western quality standards.

Additionally, restrictions imposed by the U.S. government on prestigious international universities could threaten the country’s scientific research and technological development.

Cuts to federal grants are also limiting the U.S. economy’s comparative advantage.

Global Reaction to U.S. Policy.

On the other hand, the European Union is evaluating the possibility of reducing its dependence on U.S. military backing, motivated by the uncertainty generated by Trump and his failure to meet security commitments with key allies.

In response, Germany will allocate nearly one trillion euros to defense and infrastructure over the next decade. Retaliatory tariffs could affect U.S. tech services companies, further increasing pressure on the market.

Meanwhile, China seeks to strengthen its domestic demand and promote free trade with South Korea and Japan. Although this process will take years, if China succeeds in restructuring its economy as a key engine of global demand, the global economic center could shift further eastward.

Finally, Trump’s tariff policy has not only affected the free movement of goods in North America, but it may have also paved the way for China to assume global economic leadership.

In addition to these changes, high valuations in stock markets have been a cause for concern for some time.

Recession and Stock Market Declines.

The “Mag7” stocks have led the dominance of the U.S. market in recent years, but the risks mentioned above have affected large-cap stocks.

Moreover, investors outside the U.S. bought into the idea that a Trump victory represented a favorable business environment, resulting in hundreds of billions of dollars invested in U.S. markets by the end of 2024.

However, these capital inflows at high valuations are now reversing. Investors with weak positions are forced to liquidate as stock prices fall, including those with leveraged stock positions.

The negative reaction to Tesla, due to Elon Musk’s controversial involvement with the U.S. government, has also fueled stock sales since early 2025.

Beyond the large companies, nearly half of the components in the Russell 2000 index are generating losses. U.S. exceptionalism now seems to depend on a very narrow set of companies that are currently under pressure.

The Federal Reserve and the Future.

The Federal Reserve faces the challenge of balancing the upward risks of inflation with a weakened labor market, presenting a difficult situation for economic policymakers.

Interest rates are expected to be cut in June, September, and December of 2025, but monetary policy alone will not prevent the persistent weakness in the market.