2 Beaten-Down Stocks to Avoid in the Tariff-Fueled Correction

The global tariff wars of early 2025 have delivered a gut punch to markets, with sectors reliant on cross-border supply chains or exposed to cyclical demand bearing the brunt. While tariffs are often framed as a political tool, their economic ripple effects have left investors scrambling. Among the hardest-hit stocks are two names that embody the perfect storm of tariff-driven risks: Tesla (TSLA) and United Airlines (UAL). Here’s why these beaten-down stocks warrant caution—and what their struggles reveal about the broader market’s fragility.

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1. Tesla (TSLA): Supply Chain Squeeze and Recession Fears

Tesla’s stock took a nosedive in early April 2025, plunging over 15% in two days amid fears that proposed tariffs on Mexican and Canadian auto parts would squeeze margins and disrupt production. The sell-off was exacerbated by concerns that a broader trade war would slow global economic growth, undermining demand for high-end electric vehicles.

Why It’s Risky Now:
- Tariff Exposure: A 25% tariff on aluminum and steel imports from Mexico and Canada—critical for Tesla’s Gigafactory supply chain—threatens to add hundreds of millions in annual costs.
- Margin Pressures: Analysts estimate tariffs could cut Tesla’s gross margins by 3–5%, a significant hit for a company already facing pricing wars and rising battery costs.
- Recession Fears: Investors fear Tesla’s valuation (historically tied to growth expectations) will crumble if trade wars trigger a prolonged slowdown.

Tesla’s stock has already retreated to $180, down from a 2024 high of $260—a 30% decline that may not yet reflect full tariff impacts. Until trade policies stabilize, this stock remains a high-risk bet.

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2. United Airlines (UAL): The Airline Sector’s Tariff-Induced Freefall

Airlines were among the earliest casualties of tariff-driven recession fears. UAL’s stock plummeted over 40% in Q1 2025, alongside peers Delta (DAL) and American (AAL), as investors priced in a gloomier economic outlook. Tariffs on imported goods and raw materials raised costs while stoking fears of reduced consumer spending and business travel.

Why It’s Trapped in a Bear Market:
- Input Cost Inflation: Airlines face soaring fuel and maintenance costs, compounded by tariffs on aircraft parts sourced from Asia.
- Demand Uncertainty: A potential global slowdown—amplified by trade barriers—could slash passenger volumes.
- Debt Overhang: Airlines remain leveraged from pandemic-era borrowing, leaving them vulnerable to profit squeezes.

UAL’s stock now trades at just $35, near its lowest level since 2021. While the sector historically rebounds during recoveries, the prolonged uncertainty around trade wars makes a turnaround timeline murky.

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The Broader Market Lesson: Tariffs = Supply Chain Chaos + Recession Fears

The struggles of Tesla and United Airlines reflect two interconnected tariff-driven risks:
1. Supply Chain Fragility: Companies reliant on global manufacturing (e.g., autos, semiconductors) face direct cost pressures.
2. Macro Downgrades: Tariffs fuel fears of a synchronized global slowdown, punishing “growth” stocks like Tesla and cyclical plays like airlines.

Data-Driven Caution:
- The Philadelphia Semiconductor Index fell 12% in Q1 2025 as tariffs on Chinese tech and U.S. export restrictions crimped chip demand.
- Airlines’ revenue per available seat mile (RASM) is projected to drop 8% in 2025, per JPMorgan, due to margin pressures.

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Conclusion: Stay Defensive Until the Smoke Clears

Tesla and United Airlines are cautionary tales of how tariffs can upend valuations and business models. Investors should avoid these stocks until trade policies stabilize and recession risks subside.

Focus Instead On:
- Domestic Plays: Companies with U.S.-centric operations (e.g., homebuilders, utilities).
- Tariff-Proof Sectors: Healthcare and consumer staples, which remain insulated from global supply chain shocks.

The market’s tariff-fueled correction isn’t over. Until trade tensions ease, the safest move is to steer clear of stocks caught in the crossfire.