These Stocks Will Hold Up the Best When Tariffs Hit the Economy

 

These Stocks Will Hold Up the Best When Tariffs Hit the Economy

By Steven Orlowski, CFP, CNPR

As geopolitical tensions rise and trade disputes escalate, investors are once again bracing for the economic aftershocks of tariffs. Whether it's a fresh round of levies on Chinese imports or retaliatory tariffs from abroad, one thing is clear: tariffs have the power to ripple across industries, disrupt supply chains, and shake up financial markets.

However, not all sectors are created equal when it comes to weathering tariff-related turbulence. Some companies are better insulated due to domestic production, pricing power, or essential product offerings. Here’s a look at the stocks and sectors poised to hold up best when tariffs hit the economy.

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1. Consumer Staples: Resilient Demand Meets Domestic Supply

Consumer staples—think food, beverages, household goods, and hygiene products—tend to remain in demand regardless of economic conditions. Many companies in this sector also manufacture domestically or source inputs locally, making them less vulnerable to import tariffs.

Top Picks:

• Procter & Gamble (PG): With a broad portfolio of household brands and significant domestic production, PG is a classic defensive play.

• Coca-Cola (KO): A brand juggernaut with strong pricing power and global reach, Coca-Cola can pass on modest cost increases to consumers.

• Hormel Foods (HRL): With a supply chain rooted in the U.S., Hormel is less exposed to tariff pressures than many food competitors.

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2. Utilities: Tariff-Proof and Dividend-Rich

Utilities are typically insulated from international trade disputes because their services—electricity, water, and gas—are local and regulated. In times of uncertainty, investors also favor their reliable dividends.

Top Picks:

• NextEra Energy (NEE): A leader in clean energy, NextEra is well positioned for the future while offering steady returns.

• Duke Energy (DUK): With a large domestic footprint and stable customer base, Duke remains a favorite in volatile markets.

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3. Defense Contractors: Government Spending Shields

Defense spending tends to be insulated from macroeconomic pressures, and the industry often benefits during periods of geopolitical instability. With most revenues tied to U.S. government contracts, these companies are largely immune to international trade friction.

Top Picks:

• Lockheed Martin (LMT): With multiyear contracts and international demand for its advanced defense systems, Lockheed is a strong bet.

• Northrop Grumman (NOC): A major player in aerospace and defense, Northrop enjoys long-term revenue visibility.

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4. Domestic-Focused Financials: Low Exposure to Imports

Financial firms with a strong domestic focus and minimal reliance on global supply chains can fare well when tariffs disrupt international trade. Regional banks and insurers often fall into this category.

Top Picks:

• PNC Financial Services (PNC): With a concentration on U.S. lending and consumer banking, PNC offers stability.

• The Travelers Companies (TRV): A stalwart in property and casualty insurance, Travelers remains largely unaffected by global trade flows.

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5. REITs and Real Estate: Tangible Assets in Volatile Times

Real estate investment trusts (REITs) that invest in apartments, warehouses, and data centers provide steady cash flow and are less exposed to international economic headwinds. Many offer attractive yields, which can be particularly appealing when uncertainty rises.

Top Picks:

• American Tower (AMT): As a REIT focused on communication infrastructure, AMT benefits from the growing demand for data and mobile connectivity.

• Public Storage (PSA): With high occupancy rates and a business model immune to trade disruptions, PSA is a reliable income generator.

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What to Avoid:

• Multinational Tech Hardware: These firms are deeply embedded in global supply chains and are often hit hardest by tariffs on components and finished goods.

• Automakers: Heavily reliant on cross-border parts and materials, tariffs can significantly increase costs and disrupt operations.

• Retailers with High Import Exposure: Companies that depend on low-cost imported goods—especially apparel and electronics—may see margins shrink.

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Final Thoughts

While no portfolio is entirely immune to the shocks of a trade war, strategic positioning in sectors with low international exposure, stable demand, and pricing power can cushion the blow. Investors would do well to consider a defensive tilt when tariffs loom on the horizon.

As always, diversification and a long-term perspective remain key. But when the tariff tide rises, these stocks are built to stay afloat.