TOUS Benefits From Growing Overseas Interest

The World Bank has slashed its 2025 U.S. real GDP growth forecast to 1.4% from 2.8% due to current U.S. tariffs and trade policy, a 0.9% reduction from January estimates; this contraction contrasts with relatively less severe impacts projected for Europe and Japan, where GDP growth is still expected, albeit at reduced rates. This environment, characterized by tighter global financial conditions and trade policy uncertainty, may favor international investment strategies, such as the actively managed T. Rowe Price International Equity ETF (TOUS), which has seen inflows of nearly $550 million YTD as of June 6, 2025.

Analysis

The World Bank has significantly revised its U.S. real GDP growth forecast for 2025 downwards to 1.4%, a sharp decline from the 2.8% projected for 2024 and a 0.9% reduction from January estimates, primarily attributing this to current U.S. tariffs and trade policy risks. This U.S. slowdown contrasts with comparatively less severe impacts anticipated for other major economies; the Euro area is forecast to see growth contract to 0.7% year-over-year in 2025 from 0.9% in 2024, while Japan's GDP is still projected to grow at 0.5% in 2025, despite downward revisions. The World Bank notes that tighter global financial conditions, largely due to trade policy uncertainty, are expected to slow overall global growth to 2.3% in the current year, a figure "substantially weaker than previously projected" due to higher trade barriers and weakened confidence. Against this backdrop of heightened uncertainty and market volatility, active management in overseas investments is highlighted as potentially beneficial. For instance, the T. Rowe Price International Equity ETF (TOUS) has attracted nearly $550 million in year-to-date inflows as of June 6, 2025, reflecting investor interest in international diversification. TOUS employs a bottom-up, research-driven approach focusing on company fundamentals, earnings potential, and relative valuations, primarily in large-cap developed market equities, while also considering macro factors such as country and sector outlooks; its top sector allocations as of May 31, 2025, were financials (47.07%), industrials (35.45%), and healthcare (22.33%), with a competitive management fee of 0.50%.

Key Decisions for Investors

• Given the World Bank's sharply reduced U.S. GDP forecast to 1.4% for 2025 due to trade policy concerns, contrasted with less severe impacts elsewhere, investors should consider re-evaluating U.S. equity allocations in favor of international diversification.
• The current environment of global trade uncertainty and divergent economic forecasts underscores the potential benefits of actively managed international equity strategies, such as TOUS, which can navigate market-specific risks and opportunities through bottom-up stock selection, particularly given its reported steady inflows.
• Investors should closely monitor developments in U.S. trade and tariff policies, as these are identified as primary drivers of heightened financial volatility and revised growth projections globally, potentially impacting both domestic and international asset performance.