Tariff Resilience in Service-Oriented and Defensive Sectors: Strategic Positioning for Long-Term Investors

The 2025 trade policy landscape, marked by escalating tariffs and geopolitical tensions, has forced corporations to rethink their strategies for long-term resilience. While industrial sectors face acute headwinds, service-oriented and defensive industries—such as healthcare, utilities, and supply chain solutions—are demonstrating adaptability through pricing power, operational agility, and strategic M&A. For investors, these dynamics highlight actionable opportunities in sectors poised to outperform amid trade policy uncertainty.

Service-Based Businesses: Supply Chain Agility and Pricing Power

Service-based companies, particularly those in logistics and technology-driven solutions, have shown remarkable resilience. Ryder’s Supply Chain Solutions (SCS) segment, for instance, achieved double-digit earnings growth in Q2 2025 by leveraging digital tools and optimizing last-mile delivery networks [6]. Similarly, middle-market private companies grew earnings by 5% in the first two months of the quarter, even as tariffs disrupted global trade [3]. This adaptability stems from their ability to absorb costs through margin improvements and diversify revenue streams. For example, companies like Macy’s have offset tariff impacts via targeted pricing adjustments and supplier renegotiations, revising full-year margin guidance to reflect manageable exposure [4].

The Golub Capital Altman Index underscores this trend, noting that service-based firms are less reliant on imported goods and thus better insulated from direct tariff shocks [3]. As global supply chains fragment, investors should prioritize companies with scalable digital infrastructure and localized service models.

Healthcare: Innovation and Margin Protection

The healthcare sector’s resilience lies in its inelastic demand and pricing power. While pharmaceutical companies reported stable-to-improving trends, insurers faced rising costs from Medicaid and Medicare expansions, necessitating multi-year recovery strategies [1]. However, firms like Mettler-Toledo and GE HealthCare have demonstrated proactive mitigation. Mettler-Toledo, despite a 39% U.S. tariff on Swiss imports, exceeded Q2 earnings expectations by 5.1% through pricing adjustments and operational efficiency [1]. GE HealthCare mitigated 50% of gross tariffs via duty drawback programs and local manufacturing, while its innovation pipeline—spanning AI-powered diagnostics and next-gen MRI—positions it for margin expansion [5].

Healthcare M&A activity remains robust, driven by private equity’s focus on digitization and cross-border deals. For instance, ActiGraph’s acquisition of Biofourmis’ life sciences unit and TELUS Health’s purchase of Workplace Options reflect a shift toward AI-driven, consumer-centric care models [2]. These transactions highlight the sector’s ability to consolidate fragmented markets and enhance operational efficiencies amid regulatory and tariff pressures.

Industrials: Navigating Tariff Headwinds Through Scale

Industrial sectors, particularly automotive and manufacturing, face the most direct tariff impacts. Ford and GM reported $2 billion and $3.5 billion in tariff-related costs, respectively, as U.S.-Mexico-Canada Agreement (USMCA) tariffs disrupted supply chains [1]. However, companies with diversified production networks are adapting. For example, industrial M&A activity has shifted toward core capabilities and tech enablement, with aerospace and defense firms divesting non-core assets to reinvest in AI and cybersecurity [3].

Despite a 15% decline in industrial M&A value, strategic divestitures and scale-driven efficiencies are emerging as key themes. Investors should focus on firms with strong balance sheets and cross-border manufacturing flexibility, as these are better positioned to absorb tariff shocks and capitalize on nearshoring trends.

Strategic Investment Opportunities

For long-term investors, the current environment favors defensive positioning and sector-specific tailoring:
1. Service-Based Sectors: Prioritize companies with localized operations and digital infrastructure, such as supply chain solutions providers and utilities. These sectors are less exposed to tariffs and benefit from inelastic demand [3].
2. Healthcare: Target innovators in AI-driven diagnostics and digital health, as well as firms leveraging duty-free zones and local manufacturing to mitigate costs [5].
3. Industrial Consolidators: Invest in firms restructuring through M&A to enhance scale and supply chain resilience, particularly in aerospace and automotive subsectors [3].

Portfolio strategies should also incorporate fixed-income and liquid alternatives to hedge against macroeconomic volatility, as recommended by BlackRock [1]. Defensive sectors like healthcare and utilities, with stable cash flows and pricing power, offer a counterbalance to cyclical industrials.

Conclusion

As trade policy uncertainty persists, companies and investors must prioritize agility and innovation. Service-based and defensive sectors, with their pricing power and operational flexibility, are uniquely positioned to thrive. By aligning portfolios with these resilient industries and leveraging strategic M&A, long-term investors can navigate tariff-driven challenges while capitalizing on emerging opportunities.

Source:
[1] Where Risks Rise & Momentum Builds: Q2 2025 Earnings [https://etfdb.com/etf-strategist-channel/where-risks-rise-momentum-builds-q2-2025-earnings/]
[2] Global M&A trends in health industries: 2025 mid-year [https://www.pwc.com/gx/en/services/deals/trends/health-industries.html]
[3] U.S. Middle Market Earnings and Revenue Prove Resilient in Q2 2025 [https://golubcapital.com/news-insights/u-s-middle-market-earnings-and-revenue-prove-resilient-in-q2-2025/]
[4] Tariff Impact Tracker • 2Q-2025 Earnings Season [https://app.marvin-labs.com/specials/tariffs/]
[5] GE HealthCare Q2 2025 slides: raises guidance despite tariff headwinds [https://www.investing.com/news/company-news/ge-healthcare-q2-2025-slides-raises-guidance-despite-tariff-headwinds-93CH-415960]
[6] Ryder Reports Second Quarter 2025 Results [https://newsroom.ryder.com/news/news-details/2025/Ryder-Reports-Second-Quarter-2025-Results/default.aspx]