Trump's Trade Regime: Tariffs, Economic Shifts, and the Resilient Sectors to Watch

The economic landscape of the United States has been reshaped by President Trump's aggressive trade policies since 2024. Tariffs on steel, aluminum, autos, and copper—justified under national security and reciprocity—have created a paradox: while they aim to shield domestic industries, they have also triggered higher production costs, foreign retaliation, and economic uncertainty. For investors, the challenge lies in navigating the fallout from these policies and identifying sectors that thrive despite the turbulence.

The Tariff-Driven Dilemma

The Trump administration's tariffs have pushed the U.S. average applied tariff rate to 19.9% in 2025, the highest since 1941. While these measures have bolstered domestic producers in steel and aluminum, they have also imposed significant costs on manufacturers reliant on imported materials. For example, the 50% tariff on copper has raised input costs for electronics and construction firms, while the 25% auto tariff has reduced GDP by 0.1% and eliminated 109,000 jobs. The Tax Foundation's modeling suggests that the cumulative impact of these tariffs could reduce U.S. GDP by 1.0% by 2026, with retaliatory measures from China, Canada, and the EU compounding the damage.

The legal uncertainty surrounding the IEEPA tariffs—ruled illegal in May 2025—adds another layer of complexity. If these tariffs are permanently enjoined, the GDP impact could drop to 0.2%, but until then, businesses face a volatile environment.

Hidden Costs and Distributional Effects

Beyond GDP, the tariffs have redistributed economic burdens. The average U.S. household faces a $1,588 tax increase in 2026, with middle- and low-income families bearing the brunt. For manufacturers, the costs are twofold: higher input prices and reduced competitiveness. The automotive sector, for instance, now contends with a 25% tariff on Mexican parts, which could drive up vehicle prices and erode profit margins for firms like General Motors and Ford.

Foreign retaliation has further strained export-dependent industries. China's 84% tariffs on U.S. goods, though temporarily paused, and the EU's threats to tax whiskey and agricultural products have disrupted supply chains and reduced export revenues.

Resilient Sectors: Energy, Defense, and Utilities

Amid the chaos, certain industries have demonstrated resilience—or even thrived—under Trump's trade regime.

1. Energy and Mining
The energy sector has benefited from tariffs on steel and copper, which have boosted demand for U.S. energy resources. Freeport-McMoRan (FCX), a major copper producer, has seen growth as domestic manufacturers seek alternatives to imported materials. Additionally, the EU's $750 billion energy purchase commitment through 2028 has reinforced the sector's long-term potential.

2. Defense and Aerospace
Lockheed Martin (LMT) and Northrop Grumman (NOC) have capitalized on increased defense spending and reshoring initiatives. Tariffs on foreign metals and the administration's focus on national security have driven demand for U.S.-made military equipment. However, companies with commercial aerospace exposure, like RTX Corp, face headwinds from higher material costs.

3. Utilities and Financials
Less exposed to trade volatility, utilities and financials offer stability. Sempra Energy (SPR) and Entergy (ETR) have benefited from grid modernization efforts tied to energy independence goals. These sectors, less reliant on global supply chains, provide a hedge against trade-driven uncertainty.

Under-the-Radar Opportunities

Investors seeking to capitalize on these dynamics should consider:

• ETFs: Energy Select Sector SPDR (XLE) and iShares U.S. Aerospace & Defense ETF (ITA) offer diversified exposure to resilient sectors.
• Niche Players: Westinghouse (WSTH) is investing in nuclear energy, aligning with the administration's push for stable power sources.
• Dividend-Heavy Stocks: Utilities like NextEra Energy (NEE) provide steady returns in a volatile market.

Conclusion: Balancing Risk and Reward

Trump's trade policies have created a bifurcated economy: sectors like energy and defense are insulated from global volatility, while others face headwinds. For investors, the key is to overweight industries that benefit from protectionism and underweight those reliant on global supply chains. While the legal and economic uncertainties persist, the resilient sectors offer a path to growth in an increasingly fragmented global trade environment.

In this new era of economic nationalism, the winners are those who adapt to the reshaping of U.S. industry. For now, energy, defense, and utilities stand out—not just as survivors, but as potential leaders in a transformed market.