Trump's Tariffs: 3 Steps to Safeguard Your Portfolio

The latest round of U.S. trade tariffs, announced by President Donald Trump on April 2, 2025, has sent shockwaves through global markets. With a 10% baseline tariff on all imports and higher duties on specific countries like China (34%) and the European Union (20%), the economic landscape is poised for significant disruption. As investors grapple with the potential fallout, it's crucial to adopt strategies that can mitigate risks and capitalize on opportunities. Here are three key steps to protect your portfolio in the face of these tariffs.

1. Diversify Your Portfolio

Diversification is a time-tested strategy for managing risk, and it becomes even more critical in times of economic uncertainty. By spreading your investments across different regions and sectors, you can reduce the impact of tariffs on any single part of your portfolio.

For instance, while the manufacturing sector may face higher input costs due to tariffs on raw materials, the healthcare sector might remain relatively stable. Similarly, investing in both U.S. and international markets can provide a buffer against tariff-related disruptions in any one region.

2. Focus on Low-Volatility Stocks

Low-volatility stocks, which are equities from more defensive sectors, can provide stability during market fluctuations. These stocks tend to fluctuate less than the rest of the market, making them a good hedge against tariff-related disruptions.

As noted by Goldman Sachs, low-volatility indexes in Europe and the U.S. materially outperformed other stocks in both regions during the first two weeks of March. This indicates that low-volatility stocks may be a good investment option during times of market volatility.

3. Invest in Dividend Kings

Companies that have a history of increasing their dividend payments, known as Dividend Kings, can provide a steady income stream. These companies have the financial strength to continue paying dividends even during economic downturns, offering investors a measure of security.

Examples include Coca-Cola, Johnson & Johnson, and Abbott Laboratories, which have lifted their dividends for at least the past 50 years. These companies have the resources to continue along this path even through difficult times, making them a good investment option during times of market volatility.

Conclusion

The implementation of President Trump's tariffs is expected to have significant impacts on global supply chains and trade networks. By diversifying your portfolio, focusing on low-volatility stocks, and investing in Dividend Kings, you can mitigate the disruptions caused by these tariffs and protect your portfolio from the potential negative impacts.