Canadian and Mexican stocks are beating the S&P 500. Why tariffs aren’t sinking them.

Subscribe to enjoy similar stories. U.S. stocks have sold off this year on concerns about a burgeoning trade war and an accompanying economic slowdown.

Canadian and Mexican stocks, however, are faring better. Mexican and Canadian stock markets are outperforming the U.S. this year.

The SPDR S&P 500 ETF Trust (ticker: SPY) is down 2% so far this year as of Tuesday, March 24. The iShares MSCI Canada ETF (EWC) has risen 3.4% and the The iShares MSCI Mexico ETF (EWW) has soared 11.8%. Investors may be forgiven for wondering why.

After all, President Donald Trump has imposed steep tariff increases (with the potential for more on the way) and the fallout is expected to damage the economies of Canada and Mexico as well as that of the U.S. So why isn’t more of this risk showing up in markets now? One simple reason on full display this week is investor optimism the tariffs won’t actually go into effect or last long if they do. But there are more complex factors at work in Canada and Mexico that will dictate future returns.

These dynamics are important for international investors to understand. Mexico’s value play. Mexican equities are rebounding from a terrible 2024. The iShares MSCI Mexico ETF, a broad-based index fund, plunged about 30% last year.

So 2025’s performance may be partly attributed to investors buying the dip. “You cannot look at Mexican year-to-date equity performance in isolation—you have to look at what happened in 2024," says Alejo Czerwonko, chief investment officer of emerging markets Americas, UBS Global Wealth Management. “In a way, you could argue that a lot of the angst and bad news were priced in before Trump came into office in January." Czerwonko says investors may also be assuming Trump’s tariffs won’t