Markets fell last week upon the expansion of the so-called “Trump tariffs.” The uncertainty created by the new round of duties — 25% on imported steel and 10% on imported aluminum — exacerbated long-running fears of a trade war.

Broad markets already have recovered the losses, however. The S&P 500 is at its highest level in almost three months. And while there are real risks here — both in trade and overseas politics — investors need to keep calm.

So far there’s little to suggest that trade conflicts pose a real threat to worldwide growth or U.S. equities. And while there are some factors to pay attention to, it’s also starting to look like investors may have become a bit spoiled.

The Trump Tariffs

It’s important to remember that the tariffs themselves aren’t that broad — at least not yet. And while a large, worldwide trade war (however that is defined) could hit economic growth, what’s happened so far looks much more like the first stage of a negotiation.

The U.S. has imposed its tariffs, and the impacted nations have responded. The EU is imposing 25% tariffs on products including motorcycles, denim and cigarettes. Canada has responded with its own duties on steel and aluminum. Mexico and Japan will react as well.

But it’s not as if worldwide trade is set to plunge. The impacted products total several billions dollars of trade — a fraction of the total. And it’s not as if trade disputes only arrived in January 2017. The U.S. and Canada have been fighting over lumber duties for years. WTO (World Trade Organization) actions have been a fairly common occurrence.

Is there a risk of escalation here? Certainly. But responding to the trade actions of late by selling off stocks is an overreaction.

Winners and Losers

That said, there have been some early winners — and losers — from the tariffs. Domestic steel stocks have risen, unsurprisingly. And while I wrote in February that AK Steel Holding Corporation (NYSE:AKS) was a stock to avoid — and still believe that’s the case — there are options in the space.

United States Steel Corporation (NYSE:X), in particular, still looks cheap, and Steel Dynamics, Inc. (NASDAQ:STLD) is another beneficiary for investors who believe these tariffs will hold. There are even several ETFs that could be winners.

On the other hand, Caterpillar Inc. (NYSE:CAT) and Deere & Company (NYSE:DE) both have taken a hit over the past few months, falling 12% and 13%, respectively, from January highs. Higher steel prices could pressure margins for both companies. And for Deere in particular, tariffs on U.S. farm exports could pressure already-struggling customers.

Here, too, however, it’s important not to overreact. For example, a European tariff on motorcycles sounds dangerous for Harley-Davidson Inc (NYSE:HOG), but the European market as a whole represents barely 15% of total revenue. In that market, Harley-Davidson already has long been struggling with a strong dollar, which has had a larger impact so far.

There’s not enough in the Trump tariffs to materially change the outlook for most companies — at least not yet. Investors need to watch and see if that changes. For now, however, vigilance seems much wiser than action.

Are We Getting Spoiled?

That’s true from a broad standpoint as well. A choppy market over the last few months has generated quite a few negative headlines. Trade war fears are cited as a concern. There’s a potential threat to the euro from political battles in Italy. And valuations look potentially stretched. The S&P 500, after all, has more than quadrupled from its March 6, 2009 low.

All that said, the constant discussion of “heightened volatility” and downside risk seems a bit overwrought. It’s true that volatility has risen in 2018. But that’s only against a period of historically low movement after the election. From a long-term standpoint, volatility remains toward the lower end of the range seen over the past decade.

The performance of the market as a whole seems a bit more muted. But the S&P 500 still is up 2.7% so far this year — about a 6% annualized return (and closer to 8% including dividends). That, too, might seem disappointing relative to the performance between November 2016 and January 2018. But that, too, is just fine from a historical standpoint.

Concerns always are present in the equity markets. The current market is no different. But it’s important to separate the real risks from the noise. Right now, the Trump tariffs look much more like the latter than the former.

As of this writing, Vince Martin has no positions in any securities mentioned.