Ongoing tariff-driven market volatility creates an environment of heightened investing risk heading into the summer months. New developments challenging the validity of the current U.S. tariff regime only further muddy already-obscure waters. In 2025’s unpredictable market environment, active ETFs appear well-positioned.
U.S. tariffs remain the great wild card of 2025 markets. Unexpected and frequent changes to tariffs create ongoing market volatility. An inability to predict tariff rates, targets, and longevity erodes investor confidence. This in turn leads to sharp market swings in response to new tariff announcements, and rising bond yields on weakening demand. Bond prices and yields move inverse to each other.
“The long‑standing ‘U.S. exceptionalism’ premium—built on strong consumer demand, a dynamic labor market, and supportive fiscal policy—is being reassessed,” wrote Blerina Uruci, chief U.S. economist, T. Rowe Price, in a recent economic insight piece.
Now, federal court challenges to the validity of the current tariffs adds another layer of uncertainty. The U.S. Court of International Trade ruled on May 28 that President Trump lacked the authority under the International Emergency Economic Powers Act of 1977 to set tariffs. However, the U.S. Court of Appeals for the Federal Circuit issued a stay on the ruling while the administration challenges it. A brief and its responses are due June 9, reported WSJ.
Invest for a Dynamic Market Environment With Active ETFs
Current expectations are that 2025 will prove a difficult year a bond yields continue to surge in bursts (bond prices and yields move inverse), while the dollar slides. Stocks are experiencing pronounced volatility, with sharp drawdowns followed by unpredictable bounces on new tariff developments. In such an environment, investors increasingly look to opportunities overseas as confidence in the U.S. wanes.
However, the possibility of clarity and stabilization in 2026 create the potential for growth. While Uruci remarks on rising hope for 2026 recovery, challenges linger: “Yet, risks remain: the inflationary impact of tariffs, potential labor market softening, global supply chain disruptions, and evolving trade relationships all warrant close attention.”
It’s the type of dynamic environment in which active strategies thrive. Because they aren’t constrained to benchmarks, active strategies are able to be selective when constructing their portfolios. As new opportunities and risks emerge, active managers can respond accordingly. Their ability to keep portfolios responsive while adhering to the strategy’s mandate makes active a timely consideration this year.
T. Rowe Price, an active manager with almost 1,000 investment professionals globally, offers a suite of actively managed ETFs for investors. Equity offerings include the T. Rowe Capital Appreciation Equity ETF (TCAF) and the T. Rowe Price International Equity ETF (TOUS ). Within bonds, notable funds include the T. Rowe Price QM U.S. Bond ETF (TAGG ), and the T. Rowe Price Ultra Short-Term Bond ETF (TBUX ).
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