USA TODAY International Edition
What stocks would get hurt in a trade war?
Markets are lashing out after tariffs announced
Casualties in a trade war fought with tariffs are not measured in lives but in the financial fallout that ensues.
The economic negatives of a trade fight often cause stock-price declines of innocent companies caught up in the spat, a market reaction that could put pressure on your 401(k) balance.
So with fears of a trade war on the rise after President Trump on Thursday proposed tariffs on about $60 billion of Chinese-made goods — and Beijing responded with a threat to impose $3 billion worth of tariffs on U.S. fruit, wine and other goods — here’s a list of U.S.-based investments that are vulnerable and under pressure.
U.S. exporters
When trade friction and tariffs are high, they make goods crossing borders more expensive, which crimps sales and curtails economic activity. And that’s bad news for big U.S. companies that sell a lot of stuff to overseas buyers and get a sizable chunk of their revenues abroad.
“U.S. companies with high exports seem most exposed,” Tobias Levkovich, Citi’s chief U.S. equity strategist, noted in a published Q&A with the bank’s clients. That list includes aircraft manufacturers, defense stocks and capital goods makers.
Boeing, for example, has been cited as the poster child for the type of stock that could be hard-hit by a trade war. Not only did the plane maker get more than half its sales last year from foreign markets, according to Morgan Stanley, but it also gets about 11% of its annual revenues from China. Boeing’s shares are down 10% since Trump first announced his tariffs Feb. 28.
Other multinational companies at risk are equipment makers Caterpillar and John Deere. Caterpillar is down nearly 7% in March, while Deere has declined 8%.
Big exposure to China
In the event that the “protectionist push” gains more momentum, Morgan Stanley’s chief U.S. equity strategist Mike Wilson recommends selling stocks with “high revenue exposure to China.”
The Wall Street firm created a list of U.S. companies that get 10% to 30% of their sales from China. Expeditors International, the transportation company that moves goods across the world, for example, gets 30% of its revenue from China. Its shares have tumbled 6.3% since Feb. 28.
Similarly, shares of Apple, which gets more than 22% of its revenues from China, have fallen more than 7%.
U.S. companies targeted
Keep alert for foreign nations slapping tariffs on well-known companies.
A good example is Harley Davidson, the iconic maker of motorcycles. After the U.S. announced tariffs on steel and aluminum, the European Union threatened to retaliate with tariffs of its own on Harley-Davidson and other all-American goods like bourbon and blue jeans. Since then, shares of the motorcycle maker have fallen more than 8%.