2 Stocks to Buy as Tariff-Driven Supply Chain Chaos Creates Hidden Opportunities

The escalating tariff wars of 2025 have turned global supply chains into a minefield, with automotive, tech, and energy sectors bearing the brunt. Yet, amid the chaos, two stocks—Caterpillar (CAT) and Texas Instruments (TXN)—emerge as compelling buys. Both leverage domestic production, strategic sector positioning, and tariff-resistant business models to capitalize on this disruption.

---

1. Caterpillar (CAT): The Unshaken Titan of Industrial Resilience

The machinery and construction sector faces a perfect storm: a 25% tariff on Mexican and Canadian imports, retaliatory measures from China, and a $1.1 trillion reliance on tariff-hit regions for machinery imports. But Caterpillar, the global leader in heavy equipment, thrives where others falter.

Why Buy Now?
- Domestic Manufacturing Edge: Caterpillar sources 70% of its parts from U.S. suppliers, shielding it from the $1.1 trillion tariff-impacted machinery imports. Competitors reliant on cheaper Chinese or Mexican components (e.g., Deere) face margin pressures, while Caterpillar’s vertically integrated supply chain insulates profits.
- Infrastructure Boom: The U.S. Infrastructure Investment and Jobs Act (2021) guarantees $550 billion in spending through 2026, directly benefiting CAT’s construction and energy equipment sales.
- Tariff-Driven Demand Surge: A 25% tariff on Mexican machinery imports (effective May 2025) could redirect demand toward U.S.-produced alternatives like CAT’s bulldozers and excavators.

CAT’s revenue grew 8% YoY in Q4 2024, outpacing Deere’s 3% decline amid rising tariff costs.

Risks: A prolonged recession could slow infrastructure spending. However, CAT’s 4.5% dividend yield and $12 billion in cash provide a safety net.

---

2. Texas Instruments (TXN): The Semiconductor Safe Haven

The tech sector is reeling from a 20% tariff on Chinese imports (up to 25% in April 2025), disrupting semiconductor supply chains. Texas Instruments, a U.S. analog chip leader, is uniquely positioned to profit from this shift.

Why Buy Now?
- Decoupling from China: TI derives only 8% of revenue from China (vs. 25% for peers like Intel), reducing exposure to punitive tariffs. Its $11 billion Crenshaw facility in Texas ensures domestic production of automotive and industrial chips.
- Automotive and Industrial Tailwinds: The automotive sector (46% of TI’s sales) faces $2,000/year cost hikes for U.S. households due to tariffs. TI’s chips for EVs and industrial automation are critical in a sector where 35% of U.S. car imports (from Mexico) face tariffs—forcing automakers to rely on U.S. suppliers.
- Valuation Discount: TI trades at 20x forward earnings, a 20% discount to the S&P 500. Its 3.2% dividend yield and $6.8 billion in free cash flow in 2024 offer downside protection.

TI outperformed the SOX by 15% in 2024, despite broader sector declines.

Risks: A slowdown in industrial spending could dampen demand. However, TI’s 15% gross margin cushion and $8.7 billion in net cash mitigate this risk.

---

Conclusion: A Tariff-Proof Portfolio Anchor

The 2025 tariff regime has created a “survival of the most resilient” dynamic. Caterpillar and Texas Instruments exemplify this theme:

• Caterpillar leverages its U.S. manufacturing footprint to capitalize on a $1.1 trillion tariff-crippled machinery market, with infrastructure spending as a tailwind.
• Texas Instruments benefits from decoupling from China and growing demand for chips in tariff-hit sectors like automotive.

Historical parallels suggest manufacturing and tech will bear the brunt of tariffs, but companies that control their supply chains (like CAT) or dominate critical tech niches (like TI) will thrive. With the Federal Reserve cutting rates to 2.65% to combat inflation, now is the time to position for the post-tariff world.

Investors ignoring these dynamics risk missing the next wave of winners in the tariff era. The path forward is clear—buy resilience.