Trump’s ‘America First’ Policies are Helping Foreign Stock Markets

Wall Street is shaking under President Donald Trump’s policies, but they have the opposite impact on the other side of the globe.

Trump has made headway on a key foreign policy objective: to persuade Europe to increase its military expenditure, while the White House is rushing to defend its economic program at home. Following Trump’s public criticism of Ukrainian President Volodymyr Zelenskyy last month, international leaders have reiterated their support for Ukraine and increased defense spending. This is shaking stock markets in some nations where Trump launched his trade war, driving up foreign defense companies’ shares.

JPMorgan Asset Management Chief Market Strategist Gabriela Santos told NBC News that overseas markets have outperformed their U.S. counterparts by more than any year since 1990 and that European stocks are starting the year with their best start since 1998.

This year, the STOXX Europe 600 index, which follows hundreds of businesses in 17 European nations, has increased 7.7%. The Paris-based CAC 40 is up almost 9%, while Germany’s DAX index has risen by over 15%. London’s FTSE 100 is up 5.6% over the English Channel. The Nasdaq Composite has lost more than 8% this year, while the U.S.-based S&P 500 has fallen more than 4.1%.

The fluctuations have been fueled partly by the renewed military ambitions of NATO partners. Trump has stated time and time again that he wants countries in the coalition to boost their defense budgets to 5% of GDP, which is far more than NATO’s existing minimum of 2%. On February 25, U.K. Prime Minister Keir Starmer stated that the nation’s military spending will reach 2.7% by 2027 and increase to 3%. On Friday, Britain announced a $2 billion ($2.5 billion) increase in financing available for U.K. military companies to bolster exports to partner forces.

Freidrich Merz, Germany’s probable new chancellor, struck a deal with legislators Friday to relax the nation’s defense and security expenditure regulations from the financial crisis. The action is intended to strengthen the country’s defenses by unlocking up to 1 trillion euros ($1.1 trillion).

This month, French President Emmanuel Macron announced his intention to boost national security and defense spending from about 2% of GDP to 3.5%, or 30 billion euros ($32.6 billion), joining Starmer as one of the international leaders mediating negotiations between Washington and Kyiv.

Additionally, the European Union’s executive body, the European Commission, recently stated that it had obtained 150 billion euros ($163 billion) in loans to its 27 member states using cash from the EU budget. Additionally, it outlined intentions to relax stringent budgetary regulations on member nations to free up an extra 650 billion euros ($707 billion) for military expenditures.

Defense stocks in the area have skyrocketed due to the flurry of policy changes in the U.K. and on the Continent. The stock price of Rheinmetall, a German tank maker, has more than doubled this year. Over the same period, shares of the French fighter jet manufacturer Dassault have increased by 15%, the U.K. military behemoth BAE Systems, which creates combat vehicles, naval vessels, and cyber defensive systems, have increased by almost 40%, and shares of the French aerospace and missile manufacturer Thales have increased by more than 70%. Analysts have been caught off guard by some of these actions.

In a letter to clients on Monday, HSBC global equities strategist Alastair Pinder stated, “We believed that a Trump win would strengthen US exceptionalism before the US elections.” “We didn’t anticipate that the US’s waning support for Ukraine and NATO would lead to a turning point for the eurozone, with Germany likely to follow suit with significant fiscal stimulus.”

As the first of two central international banks to do so, the London-based bank, the biggest in the area, downgraded U.S. markets from “overweight” to “neutral” on Monday.

Trump and his closest aides have started to allude to consumer economic hardship, despite his campaign promises to “end inflation and make America affordable again” on his first day in office. Additionally, Trump has minimized the recent purchase after claiming for a long time that stock markets are a measure of success and that things would be “great” on Wall Street if voters put him back in office. “Watching the stock market isn’t possible,” he stated Sunday.

A request for a response from a White House representative was not answered. This week, senior administration officials have rushed to persuade the public that their programs are effective.

“The real economy is our main concern. Can we establish a situation where the market and the American people can both benefit in the long run?” Scott Bessent, the Treasury Secretary, stated on CNBC Thursday that “A small amount of volatility over three weeks doesn’t worry me.”

Meanwhile, European authorities are considering tearing up some red tape in response to Trump’s plans to demolish significant portions of the federal government.

Shortly after Trump’s election, the governor of the Bank of France said that European officials “will take great care to maintain a competitive level playing field” in the face of a “wind of deregulation” blowing across the Atlantic. The European Commission put up a set of “simplification measures” in late February, claiming they would benefit businesses and individuals. The European Parliament’s largest party has urged legislators to expedite its adoption.

Indeed, a frenzied few weeks on the trading floors of Europe and Britain do not always herald a widespread or long-lasting economic recovery. Despite increasing volatility, the U.S. economy still has many advantages Trump inherited, and the country’s recovery from the epidemic has outperformed the majority of other industrialized nations. In comparison, many other economies still have serious issues that experts don’t think will be quickly fixed.

With the yield on 10-year government bonds reaching levels not seen since 2008, the United Kingdom is facing slow growth and soaring borrowing costs. Compared to the previous year, when France benefited from hosting the Olympics, the French central bank predicts GDP growth of only 0.7% in 2025. Additionally, Germany, formerly called the “engine of Europe,” has seen a decline in economic production for the past two years due to rising interest rates, rising energy prices, and declining demand for its goods abroad.

Simultaneously, the bank improved its assessment of Chinese equities, several of which have recently seen a little increase. Chinese tech equities have enjoyed even more significant gains, while the Hang Seng index, which measures some of Hong Kong’s most prominent firms, is up 19.5% this year. While the technology sector of the S&P 500 has been down 9.5% this year, the KWEB exchange-traded fund has risen 25%. However, U.S. policies aren’t as prevalent there as they are in Europe.

Asian investors have been encouraged by domestic reasons such as economic stimulus, reduced borrowing rates, and even excitement around Chinese AI firm DeepSeek, according to Xin Sun, a senior lecturer in Chinese and East Asian business at King’s College London. Furthermore, at best, current market success is a narrow economic indication, much as in Europe.

He said the market recovery has been erratic and that “we are seeing some signs of early recovery in the Chinese economy but not a full-fledged recovery.” Sun said, “International capital is searching for alternative ways to diversify their growing risk away from the U.S. market.” “But everyone will be impacted by the uncertainties brought about by the Trump administration.”