The Hidden Cost of De-Globalization | Kai Wu on the Truth Behind Trade Wars

In this episode of Excess Returns, Kai Wu of Sparkline Capital returns to break down his latest research piece, Investing Amid Trade Wars. Using over two dozen insightful visuals, Kai explores how investors should think about global trade exposure in an era of rising tariffs, economic nationalism, and geopolitical uncertainty. He makes the case for staying invested in high-quality multinational companies—especially those rich in intangible assets—and offers four actionable ways to build more resilient global portfolios. Topics Covered: Why the market reaction to tariffs is both rational and potentially short-sighted The long-term outperformance of global vs. domestic firms How to define and measure global trade exposure at the company level Real-world trade shocks and what they reveal about investor behavior The four traits of resilient global firms Why intangible-heavy businesses are uniquely positioned to weather trade disruptions International vs. U.S. multinationals: hidden value in non-U.S. stocks Practical suggestions for portfolio construction in a deglobalizing world Timestamps: 00:00 – Intro and framing the importance of global trade exposure 02:00 – What triggered the research: Liberation Day and RH’s collapse 04:00 – Global firms vs. domestic: profitability and performance data 05:27 – Historical context: U.S. tariff levels hit 100-year highs 08:00 – The three (conflicting) goals behind tariffs 10:00 – How top S&P 500 companies are actually multinationals 12:00 – Applying the framework to entire indices and regions 14:30 – The 2x2 framework: defining multinational, exporter, importer, domestic 17:00 – Why labeling companies by country of origin is misleading 19:20 – Performance gap: global vs. domestic over time 20:25 – Market-cap vs. equal-weight returns in global trade exposure 21:30 – Services as exports: why trade isn’t just about goods 22:15 – Global firm concentration by country 23:15 – Sector-level global exposure insights 25:06 – Sector vs. stock-level attribution: what’s driving global firm outperformance 26:30 – Three core reasons global firms outperform 29:08 – Fundamental metrics: global firms show higher ROE, ROA, margins 30:10 – Trade Policy Uncertainty Index hits unprecedented levels 31:30 – Do global firms underperform in periods of trade shocks? 33:20 – Is there a geopolitical risk premium? 33:34 – China exposure by industry 36:11 – Can companies pivot production? Apple’s India shift example 38:44 – Employee location data as a proxy for supply chain shifts 39:25 – Ex-China global portfolio performance 40:28 – What makes a supply chain “resilient”? 43:08 – Global firms are more intangible-heavy—why that matters 45:00 – Performance of high vs. low intangible firms (global and domestic) 48:09 – Why intangibles thrive in uncertain times 49:00 – International stocks begin outperforming—will it last? 50:45 – Valuation gap: U.S. vs. non-U.S. global firms 52:46 – Final takeaways: Stay the course and tilt toward resilient global firms