How To Make Money From Higher Tariffs In The Stock Market
There's a way to profit off of almost anything. You need to understand the flow of money.
Tariffs and trade wars may dominate financial news, but for the savvy investor, they also spell opportunity. While tariffs are widely viewed as an economic negative, what they actually do is divert capital flows, disrupt supply chains, and shift consumer behavior—creating winners as well as losers in the stock market. To be successful in the stock market, you need to understand how money flows in and out of different sectors.
Understanding how tariffs impact industries can set your portfolio up for maximum returns. Whether you're looking to invest for the long haul or short-term trading opportunities, here's how you can profit from tariffs in the market today.
Invest in Domestic Producers
Since tariffs cause imported goods to be more costly, domestic industries become more competitive. Domestic industries are able to raise prices or gain market share since imported substitutes now cost more. This process benefits sectors that compete directly with foreign imports.
Key Sectors & Stocks to Watch
Steel & Aluminum: With the U.S. imposing tariffs on steel and aluminum imports, domestic producers become the principal sources of supply. Domestic participants like Nucor (NUE) and Steel Dynamics (STLD) can raise prices and enhance margins due to reduced foreign competition.
Agriculture & Food Processing: When the U.S. imposes tariffs on agricultural imports (such as European dairy or Brazilian beef), U.S. manufacturers such as Archer Daniels Midland (ADM) have heightened demand for domestic substitutes.
Manufacturing & Heavy Equipment: When tariffs inflate the cost of foreign-made equipment and machinery, U.S.-based manufacturers such as Deere & Co. (DE) and Caterpillar (CAT) can capitalize by selling more product within the country.
Companies To Avoid (Or Accumulate For The Long Term)
Invest in stocks of domestic manufacturers who benefit from reduced foreign competition. Look for firms with decent pricing power that can increase prices without losing demand. Many companies import raw materials, components, or completed goods. When tariffs render them more costly, these companies either transfer the costs to customers—perhaps reducing demand—or else absorb them, which translates into lower profit margins.
Retailers: Big box retailers like Walmart (WMT) and Target (TGT) import a lot of goods from China and other foreign producers. If tariffs make those items more expensive, they have to either raise prices (which could hurt sales) or absorb the expense themselves (which reduces profits). For example, Target’s price has been getting destroyed over the last 6 month period as the company announced softer guidance over the next year due to lower consumer spending. However, long term investors can also benefit by accumulating shares at these levels.
Automakers: Ford (F) and General Motors (GM) are a couple of the manufacturers that import steel, aluminum, and electronic components. Tariffs on those goods increase the cost of production, which can eat into margins or lead to increased car prices that may weaken demand.
Tech & Electronics: Electronics companies frequently import parts or completed goods from overseas. Apple (AAPL), which has China-based supply chains, is one company that may take a hit if tariffs drive production costs higher. As you’ve probably seen, tech markets have been impacted the most from these tariffs.
Invest in Companies With Pricing Power
Some companies are tariff-proof because they have pricing power—the ability to raise prices without discouraging buyers. Those kinds of companies are often in industries with loyal clients, strong brand names, or must-have items that individuals will buy regardless of price increases.
Luxury Goods: High-end names like LVMH (LVMUY) (owner of Louis Vuitton, Dior, and Moët Hennessy) and Ferrari (RACE) have less price-sensitive buyers. Should tariffs push prices higher, these companies can pass them through without a material impact on demand.
Consumer Staples & Healthcare: Companies that sell everyday essentials, such as Procter & Gamble (PG) (owner of such brands as Tide, Pampers, and Gillette) and Johnson & Johnson (JNJ) (seller of medical and hygiene products), can increase prices without dissuading consumers.
Software & Subscription-Based Services: Companies like Microsoft (MSFT) and Adobe (ADBE) license on a subscription basis, so customers will be less likely to cancel due to modest price increases because of tariffs.
These are just ideas and shouldn’t be taken as financial advice. Please do your own research or consult with a professional before making investment decisions.