Trump Tariffs: Investors Cautious Despite Monthlong Suspension for Mexico
The announcement by President Trump to delay tariffs on Mexican imports has provided temporary relief for investors. Stocks initially rebounded from session lows, reflecting optimism about the potential implications for the administration's broader trade strategy.
However, experts caution that the market may be overly optimistic about the future of Trump's tariff agenda. President Trump's strong support for tariffs and the possibility of additional tariffs on Canada and China pose ongoing risks.
Henrietta Treyz of Veda Partners warns that "Tariffs are a negotiating tactic, but I'm taking the China tariffs quite seriously." She emphasizes the potential negative impact on US consumers and the different economic environment compared to 2018.
Goldman Sachs' David Kostin anticipates that the heightened uncertainty will weigh on equity valuations, potentially reducing the forward 12-month P/E multiple by about 3%. The technology sector (XLK) faces significant exposure to geopolitical escalation between the US and China, with analysts expecting a negative impact on product demand.
KeyBanc's John Vinh highlights the potential risks for companies such as Qualcomm (QCOM), Qorvo (QRVO), and Skyworks (SWKS), which face downstream impacts from reduced demand due to price increases. Goldman Sachs' analysis includes these tech names along with other consumer-facing firms.
Evercore's Mark Mahaney identifies Amazon (AMZN) as being particularly vulnerable to Trump's tariff strategy. He cites the recent rhetoric towards other major trading partners and the potential harm to manufacturers and retailers.
Given the uncertainty, investment professionals advise caution. Callie Cox of Ritholtz Wealth Management suggests holding more cash or focusing on evergreen themes. Scott Helfstein of Global X recommends seeking refuge in US infrastructure, defense technology, and US energy infrastructure as "ports in the geopolitical storm."