Tariff-Driven Volatility and the Industrial Sector: A Strategic Case for Undervalued Manufacturing and Logistics Stocks

The industrial sector has become a battleground for trade policy in 2025, with U.S. import tariffs surging to 20% by Q3 2025 from 1.5% a year earlier, as detailed in a KPMG report. This volatility has triggered a cascade of responses, from margin compression to supply chain reshoring. Yet, amid the turbulence, a compelling investment opportunity is emerging: undervalued manufacturing and logistics stocks poised to recover as trade policies stabilize.

Tariff Turbulence and Sector Resilience

According to the same KPMG LLP survey, 40% of industrial manufacturing (IM) executives reported a 1–5% decline in gross margins due to rising raw material costs and lagging sales. Meanwhile, 69% of manufacturers are reshoring supply chain segments, driven by tariffs, trade policies, and government incentives, according to a 2025 manufacturing update. This shift is reshaping sub-industries, with onshoring, supply chain technology, and industrial real estate emerging as resilient sectors. For instance, the U.S. industrial real estate market, despite a 7.4% vacancy rate in mid-2025, is seeing demand for modern logistics facilities driven by e-commerce growth and 3PL outsourcing, as discussed in the industrial real estate outlook.

Undervalued Stocks with Recovery Potential

1. Kaiser Aluminum (KALU): With a P/E ratio of 21.93 as of October 2025, according to the AGCO P/E ratio, KALU is trading at a discount to its historical average. The company benefits from reshoring tailwinds, with expected earnings growth of 84.9% in 2025, as noted in a Yahoo Finance article, driven by federal incentives for critical minerals and infrastructure.
2. AGCO Corporation (AGCO): Despite a high P/E ratio of 82.51, per the AGCO P/E ratio page, AGCO's 36.7% projected earnings growth aligns with the resurgence in agricultural equipment demand and domestic manufacturing incentives (reported in the Yahoo Finance article). Its strong balance sheet and focus on automation position it to outperform in a post-tariff environment.
3. ZTO Express (ZTO): The logistics giant's debt-to-equity ratio of 0.29 as of October 2025, according to ZTO financial ratios, signals financial prudence. ZTO's investments in AI-driven automation and smart logistics infrastructure are highlighted in a SobelNet analysis, making it a prime candidate for recovery as e-commerce demand stabilizes.
4. Radiant Logistics (RLGT): Analysts project a price target of $8.33 (vs. current $6.00) and $0.08 EPS for Q4 2025, per RLGT analyst ratings. RLGT's focus on freight brokerage and supply chain digitization, noted in the SobelNet analysis, positions it to capitalize on nearshoring trends.

Policy Stabilization and Sub-Industry Catalysts

The U.S.-China tariff truce in May 2025, delaying higher tariffs until November 2025, is documented by an iContainers tariff tracker, providing a critical window for stabilization. Additionally, the NAIOP Industrial Space Demand Forecast anticipates industrial real estate absorption to rebound in Q2 2026 as occupiers adjust to new tariff regimes, consistent with commentary in the industrial real estate outlook. For investors, this timeline underscores the urgency of entering undervalued stocks before policy normalization.

Strategic Entry Points

The industrial sector's recovery hinges on three pillars:
1. Onshoring: Companies like KALU and AGCO are leveraging federal incentives to rebuild domestic supply chains, as discussed in the Yahoo Finance article.
2. Supply Chain Tech: Firms such as ZTO and RLGT are adopting AI and automation to mitigate tariff-driven disruptions, per the SobelNet analysis.
3. Industrial Real Estate: Demand for modern logistics facilities is expected to grow as e-commerce and 3PL outsourcing expand, per the industrial real estate outlook.

While short-term volatility persists, the long-term outlook for industrial sub-sectors is favorable. As the OECD Economic Outlook notes, global trade growth is projected to slow to 0.5% in 2026, but U.S. domestic demand-particularly in high-value manufacturing and logistics-remains robust.

Conclusion

The industrial sector's current challenges are not a death knell but a catalyst for structural transformation. By targeting undervalued stocks with strong fundamentals and policy tailwinds, investors can position themselves to capitalize on the inevitable stabilization of trade policies. The key lies in identifying companies that are not only surviving the tariff storm but thriving in its aftermath.