(Bloomberg) -- Free-trade proponents might be out of fashion at the White House, but not in the U.S. equity market.

A Goldman Sachs Group Inc (NYSE:GS). basket of U.S. stocks that derive the bulk of sales abroad has outperformed the S&P 500 Index since March 1, the day that President Donald Trump rattled financial markets with a surprise announcement that his administration will impose tariffs on steel and aluminum imports.

While the Dow Jones Industrial Average plunged 420 points March 1, it’s rallied almost 3 percent since as investors grow more confident that the most severe protectionist policies won’t become reality.

“Although equity prices have moved in reaction to the proposed metals tariffs, investors do not appear concerned about escalating trade conflict,” David Kostin, Goldman’s’ chief U.S. equity strategist, wrote in a note to clients late Friday. “The strong growth environment helps explain the resilience of equity prices and investor sentiment.”

That’s not to say the proposed tariffs don’t pose a threat to equities, Kostin added. While the levies announced so far will have a trivial effect on U.S. activity, Goldman’s economists believe retaliation from major trading partners is likely.

“The larger threat to corporate earnings and equity valuations is the potential for escalating trade conflict in response to these tariffs,” Kostin wrote.

Bloomberg Intelligence analysts estimate that if the U.S. raises import costs by 10 percent and the rest of the world retaliates by lifting tariffs on U.S. exports, the cost by 2020 would be 0.5 percent of global GDP. That would amount to $470 billion, Jamie Murray and Tom Orlik wrote in a note Monday.

And a peek at the underbelly of the equity market suggests investors see little reason to price in that risk, remaining confident that the Trump administration isn’t spoiling for a fight. Goldman says the outperformance of domestically focused small caps in the Russell 2000 this month has to do with positioning and the months of prior underperformance.

Indeed, Canada and Mexico have already been exempted from the tariffs indefinitely as renegotiations of the North American Free Trade Agreement continue. Australia may also avoid the taxes, and Treasury Secretary Steven Mnuchin said discussions regarding further exemptions will be ongoing. Trump himself has given the European Union an out, tweeting that if the bloc drops “their horrific barriers & tariffs,” he’ll spare it.