Wharton Prof Siegel Bullish on Stocks Amid US-China Trade Tensions

Wharton professor Jeremy Siegel remains bullish on stocks amid U.S.-China trade tensions, viewing tariffs as temporary negotiating tools. He predicts new highs by 2025 if levies are rolled back, driven by strong earnings, though persistence could cause corrections and inflation. Investors should diversify and monitor negotiations closely.
Wharton Prof Siegel Bullish on Stocks Amid US-China Trade Tensions
Written by Dave Ritchie

In a recent analysis, renowned Wharton finance professor Jeremy Siegel expressed optimism about the stock market’s trajectory amid ongoing U.S.-China trade tensions, suggesting that the current tariffs on Chinese goods may prove short-lived. According to Business Insider, Siegel argued that if these levies are rolled back, equities could surge to fresh record highs by the end of 2025, buoyed by resilient corporate earnings and a stabilizing global economy. This view comes as investors grapple with President Trump’s aggressive trade policies, including a proposed 100% tariff on Chinese imports set to take effect in November 2025, which has already sparked volatility in major indices.

Siegel’s perspective draws on historical patterns where trade disputes have often been resolved through negotiations, preventing long-term economic drag. He pointed to past episodes, such as the 2018-2019 U.S.-China trade war, where initial tariff hikes were eventually tempered, allowing markets to rebound. Analysts at CNBC echoed this sentiment in a May 2025 report, noting that a temporary tariff cut under a new U.S.-China deal was labeled a “dream scenario” by market watchers, potentially paving the way for reduced inflation pressures and renewed investor confidence.

Tariffs as a Negotiating Tool: Weighing Short-Term Pain Against Long-Term Gains

The potential impermanence of these tariffs is central to Siegel’s bullish outlook. In his comments reported by ThinkAdvisor in June 2025, he emphasized that with aggressive tariff rhetoric subsiding, the market could refocus on strong earnings growth. However, not all forecasts align seamlessly; a December 2024 CNBC piece quoted Siegel warning of a possible 10% market correction in 2025 if tariffs persist, highlighting the risks of prolonged trade friction. This duality underscores the high-stakes game of brinkmanship between Washington and Beijing, where tariffs serve more as leverage than permanent policy.

Posts on X from economic commentators like Michael Pettis in April 2025 have highlighted the severe impact on China’s GDP, potentially shaving off 2.4 percentage points due to U.S. tariffs, which could pressure Beijing into concessions. Similarly, a Bank of America analysis shared on X in April 2025 projected a 10% hit to S&P 500 earnings if tariffs escalate, including retaliatory measures from China and the EU, potentially lowering the index’s 2025 target to 5,600.

Market Resilience Amid Geopolitical Uncertainty: Earnings and Inflation Dynamics

Despite these headwinds, Siegel remains confident in the underlying strength of the U.S. economy. As detailed in a July 2023 Markets Business Insider article, he has long championed the idea that lower inflation and robust profits can propel stocks forward, a thesis that holds even under tariff threats. Recent data supports this: with core inflation at 2.8% and tariff revenues reaching $22.2 billion in May 2025, as noted in X posts referencing government figures, the market has shown remarkable resilience, with the S&P 500 hitting record highs.

Investors should monitor developments closely, Siegel advised, particularly around federal budget deficits and trade negotiations. A November 2024 ThinkAdvisor report captured his view of a bull market charging into 2025, provided tariffs don’t derail corporate momentum. Yet, warnings from Fortune in a recent piece about China’s grip on rare-earth minerals add another layer of complexity, as U.S. dependence could amplify tariff effects on supply chains.

Investor Strategies in a Tariff-Laden Environment: Positioning for Upside

For industry insiders, the key takeaway is strategic positioning. Siegel’s analysis suggests diversifying away from tariff-vulnerable sectors like technology and consumer goods, while favoring resilient areas such as domestic manufacturing. An International Business Times article from three days ago detailed Trump’s 100% tariff announcement as an escalation in the economic war, predicting short-term disruptions but potential long-term benefits if it forces supply-chain reshoring.

Ultimately, if tariffs are indeed temporary—as Siegel posits—the market’s path to new highs could materialize swiftly. However, persistent levies might usher in inflation spikes and earnings pressure, as forecasted by Citibank in X discussions from April 2025, which estimated a 9% gross margin hit for companies like Apple. Balancing these risks requires vigilance, with negotiations likely to dictate the market’s fate into 2026.

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