Unlocking Value in a Shifting Trade Landscape: Defensive Stocks to Watch in July 2025

The U.S.-China trade relationship in July 2025 remains a delicate balancing act between cooperation and confrontation. While a 90-day tariff truce expires on August 12, recent developments—such as the U.S. easing export controls on key AI chips and China's pledge to expedite export licenses—suggest both sides are prioritizing stability over escalation. Meanwhile, the U.S.-EU trade deal brokered in July has injected optimism into global markets, with the S&P 500 hitting record highs. For investors, this mix of geopolitical pragmatism and economic interdependence creates fertile ground for identifying undervalued equities in defensive sectors and international markets.

Defensive Sectors: The Safe Harbor in a Storm

Defensive sectors like semiconductors, utilities, and consumer staples have historically outperformed during periods of trade uncertainty. These industries are less sensitive to cyclical downturns and often benefit from long-term structural trends. In July 2025, three international stocks stand out as compelling value plays:

1. STMicroelectronics (STMPA):
   The European semiconductor giant trades at €27.66, a 48% discount to its estimated fair value of €53.35. Despite declining profit margins, STMicroelectronics is projected to grow earnings by 23.5% annually over the next three years, driven by strategic partnerships in advanced optics and AI-driven human presence detection. Recent R&D investments position it to capitalize on the global push for energy-efficient electronics.

2. Puyang Refractories (002225):
   This Chinese manufacturer of industrial refractory materials is trading at CN¥6.34, or 49.7% below its intrinsic value of CN¥12.61. While profit margins have contracted, the company's 45.5% projected earnings growth stems from its critical role in the global supply chain for electric vehicles and construction. Investors should monitor its ability to service debt, as interest coverage remains a concern.

3. Chung-Hsin Electric (1513):
   A Taiwanese leader in electrical machinery, Chung-Hsin trades at NT$166.5, 21.5% below its fair value of NT$212.19. With earnings growth forecast at 21.55% annually, the company benefits from the global energy transition and its reliable dividend payouts. Its recent foray into smart grid technology aligns with regulatory tailwinds in Asia and Europe.

Beyond Borders: International Opportunities in a Trade-Optimistic Climate

The U.S.-China trade truce has indirectly boosted global equity markets by reducing volatility. For instance, the Nasdaq Composite's resilience in July 2025 reflects investor confidence in tech firms that rely on cross-border supply chains. However, international markets offer more attractive valuations:

• Rocket Lab (RKLB):
  The U.S. space launch company is trading at US$46.88, a 33% discount to its fair value of US$70.07. Its 28.1% projected revenue growth is fueled by surging demand for satellite launches, particularly in defense and climate monitoring. Recent partnerships with European space agencies add geopolitical credibility.

• DoorDash (DASH):
  At US$239.82, DoorDash is 30.9% undervalued relative to its intrinsic value of US$347.22. The stock's appeal lies in its expanding delivery network and advertising platform, which are insulated from trade tensions. Its recent exclusion from major indices highlights short-term volatility but underscores long-term growth potential.

• Oracle (ORCL):
  The enterprise software giant trades at US$238.11, a 10.4% discount to its fair value. Oracle's 16.7% earnings growth is driven by AI-driven cloud services and strategic acquisitions. Its recent collaboration with Chinese tech firms—despite geopolitical risks—signals a pragmatic approach to market access.

Navigating Risks and Rewards

While these stocks offer compelling valuations, investors must remain vigilant. The U.S.-China trade truce is fragile, and a failure to extend it could reignite volatility. For example, the U.S. has yet to lift its 55% combined tariff rate on Chinese goods, including the 20% fentanyl-related surcharge. Additionally, China's refusal to curb exports of dual-use technology to Russia remains a sticking point.

However, the U.S.-EU trade deal provides a template for de-escalation. By resolving disputes over agricultural tariffs and digital services taxes, the agreement has demonstrated that multilateral cooperation can stabilize markets. This precedent may encourage similar agreements in the U.S.-China context, particularly if Treasury Secretary Scott Bessent's push for a tariff extension gains traction.

Strategic Outlook for Investors

For those seeking defensive exposure, the key is to balance sector resilience with geographic diversification. STMicroelectronics and Chung-Hsin Electric, for instance, are less exposed to U.S.-China tariffs than their peers, while Puyang Refractories benefits from China's domestic industrial demand. Similarly, Rocket Lab and Oracle offer cross-border growth in sectors less impacted by trade friction.

In a market where volatility remains a wildcard, these undervalued equities provide a hedge against uncertainty. As the U.S. and China navigate their trade truce, investors who focus on companies with strong fundamentals and strategic positioning are likely to outperform. The coming months will test the durability of current optimism, but for now, the interplay of trade policy and market dynamics offers a unique window of opportunity.