Trump's Tariffs: Stocks with the Most U.S. Sales

As President Donald Trump prepares to announce sweeping new reciprocal tariffs on Wednesday, the stock market is bracing for impact. The tariffs, set to take effect immediately after the announcement, are expected to raise costs for U.S. companies and potentially lead to retaliatory measures from trading partners. This uncertainty has already caused a sell-off in the stock market, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all down in early trading.

The tariffs are expected to have the biggest impact on companies with significant U.S. sales. These companies are likely to face increased costs due to the tariffs, which could lead to higher prices for consumers and reduced demand for their products. This could result in decreased revenue and profitability, negatively affecting stock prices.

One sector that is likely to be particularly affected is the automotive industry. The tariffs will stack on top of existing tariffs on cars, metals, and Chinese goods, potentially leading to a 52.5% tariff rate for a Mexican-built car previously charged 2.5% to enter the U.S. This significant increase in tariffs could lead to higher prices for consumers and reduced demand for cars, negatively impacting the stock prices of automotive companies.

Another sector that could be affected is the technology sector. Companies like Taiwan Semiconductor Manufacturing and NXP Semiconductors rely on global supply chains and could face increased costs due to the tariffs. This could lead to reduced profitability and lower stock prices for these companies.

In the consumer goods sector, companies like Nike and Polaris could also be impacted. Nike, for example, is the largest athletic footwear brand in all major categories and markets, and any increase in costs due to tariffs could lead to higher prices for consumers and reduced demand for their products. This could negatively impact Nike's stock price.



Despite the uncertainty, there are still opportunities for investors to mitigate the risks associated with the tariffs. One strategy is to focus on companies that offer some sense of certainty in terms of cash flows and company fundamentals. For example, Morningstar's Best Companies to Own list includes companies like Polaris, Nike, Pfizer, Taiwan Semiconductor Manufacturing, and NXP Semiconductors, which have significant competitive advantages and predictable cash flows. These companies are run by management teams that have a history of making smart capital-allocation decisions, which can help them navigate through uncertain economic conditions.

Another strategy is to invest in companies that have a diverse portfolio of products and services, which can help insulate them from the impact of tariffs on specific industries. For instance, Pfizer has a diverse portfolio of drugs that helps insulate the company from any one particular patent loss. This diversification can help mitigate the risks associated with retaliatory measures from trading partners.

Investors can also consider investing in companies that have a strong presence in multiple markets, which can help them diversify their revenue streams and reduce their dependence on any one market. For example, Nike is the largest athletic footwear brand in all major categories and all major markets, which can help it overcome current challenges, such as uneven demand for sportswear in key markets.

Additionally, investors can look for companies that have a history of innovation and are investing in new marketing and products. For instance, Nike has a renewed focus on its key partners, its products, and its connections to international athletics under new CEO Elliott Hill. Hill is investing in new marketing and products while rebuilding Nike’s relationships with retailers and the global sports community. This focus on innovation and marketing can help companies stay competitive and adapt to changing market conditions.

Furthermore, investors can consider investing in companies that have a strong balance sheet and financial flexibility, which can help them weather economic downturns and navigate through uncertain economic conditions. For example, Taiwan Semiconductor Manufacturing has a disciplined approach to capital spending, which reduces risks of oversupply and allows more flexibility in cutting-edge research to maintain its leadership.

In summary, while the implementation of Trump's reciprocal tariffs is likely to have a significant impact on the stock prices of companies with substantial U.S. sales, there are still opportunities for investors to mitigate the risks associated with the tariffs. By focusing on companies with strong fundamentals, diverse portfolios, a strong presence in multiple markets, a history of innovation, and financial flexibility, investors can help protect their portfolios from the potential impact of tariffs and retaliatory measures.