tariff on China.
Quilter Investors investment strategist Lindsay James said many investors had taken this as a sign that tariffs were being used more as a bargaining chip, with markets tumbling this morning.
Dan Coatsworth, investment analyst at AJ Bell, said: “I think people have realised Trump is playing games with the market and the unfortunate consequence is uncertainty.”
But uncertainty can lead to opportunity and Helen Jewell, chief investment officer of fundamental equities at BlackRock, said she “intends to identify the winners and losers from tariffs”.
As such, below Trustnet asks stockpickers to make sense of the fall-out from the latest news out of the White House and identify some companies that could prosper, as well as those that may be in trouble.
The potential winners of tariffs
For Matthew Page, portfolio manager of the Guinness Global Innovators fund, the ‘winners’ in the tariff story may be found amongst large-scale multinational companies.
“At this stage, owning businesses that are well diversified geographically is important but they also need to be well-diversified in terms of the end user of their products”, he explained. With investors struggling to guess what Trump might do, or the impact his policies will have, Page argued that being exposed to one type of customer “is a risk in today’s market”.
Multinational companies are consequently a “very sensible way” to insulate your portfolio from tariffs because they have “manufacturing diversified around the world, close to their end markets”.
Additionally, many multinational businesses such as Meta or London Stock Exchange Group are more services based and so still have a broad multinational user base, without being dependent on trading to the US.
For Jewell, this emphasis on multinationals has value. She argued that the winners of tariffs have a few common features, most significantly a “strong brand name” and a product that is “difficult to replicate anywhere else”.
She explained businesses in this camp “are likely to either be somewhat exempt from tariffs or where people will be willing to pay those tariffs because they want that end good”.
She identified the European fashion brand Hermes as an example of these qualities. Year to date (YTD), its shares are up by 17.3% and 325% over the past five years. While it has slipped today by around 2%, Jewell argued it was a great example of a business that combined a unique product with a multinational brand name.
“If Hermes is producing a bag that cannot be replicated elsewhere, then even if it does have a tariff, people will be more likely to pay up. That is what we look for”, she explained.
The losers
However, if there are winners in the tariff story, there must also be losers. For Page, although multinationals such as the Magnificent Seven stand out as potential winners in the tariffs story, the biggest losers could be small regional companies that rely on the US as a core part of their supply chain.
He used the example of a small German auto component manufacturer that might want to export to the US when all the manufacturing is happening in Germany.
For Simon Gergel, portfolio manager of the Merchants Trust, a good example of this is the automotive manufacturer Dowlais Group, where most of its manufacturing happens in Mexico and so is reliant on cheap trade.
“You are assembling a product in Mexico, with components from China and then exporting it to America”, he said. As a result, Dowlais’ supply chain is heavily dependent on markets most likely to be impacted by tariffs.
Gergel also pointed to Guinness owner and spirit maker Diageo, which at first glance appears to be a multinational company described in the winners section above.
“It makes tequila in Mexico, rum in Canada and whiskey in Scotland”, Gergel explained. The new wave of tariffs against both Mexico and Canada is therefore likely to put even further pressure on the company, which has been a struggling stock for more than five years now.
As a result, Gergel argued Diageo is a “classic example” of a company that will struggle under the latest in Trump’s economic policy measures.