Trading Trump tariffs: stocks and markets to watch
US President Donald Trump's tariffs targeting China, Canada, and Mexico are poised to influence global economic trends. Here’s what you need to know.
US-China tariff tensions and market reactions
United States (US) President Donald Trump is imposing a 25% tariff on all goods coming from immediate neighbours Canada and Mexico until the countries crack down on drug trafficking and illegal migration into the US. The Trump administration is also placing a 10% tariff on goods from China until it reduces fentanyl smuggling.
Trump has consistently advised he would use tariffs to grow the US economy, protect jobs, and raise revenue. These tariffs may already be priced into the markets, though many analysts thought the plan was a bluff.
Understanding tariffs
It is worth explaining how tariffs work. A tariff is a domestic tax levied on goods entering a country.
For example, if a $100,000 car is imported into the US with a 25% tariff, the domestic US-based company importing the car would be liable for a $25,000 fee.
Trump tariffs implications
Increased US tariffs could significantly impact the global economy. In 2023, the US imported $3.1 trillion of external goods, amounting to 11% of its gross domestic product (GDP). Crude petroleum and cars are the top imports, with many coming from Canada and Mexico.
The US currently generates about 2% - or $80 billion - of its total tax revenue from tariffs, but the economic burden tends to fall on US consumers through higher prices or on US companies through lower profits.
Most of the burden is borne through consumer price increases. Think tanks estimate the new Trump tariffs could reduce middle-class incomes by between $1700 and $3900 per year, while increasing inflation.
Economic and political ramifications of tariffs
Some economists argue that tariffs encourage domestic manufacturing and enhance national security. However, the 2018 steel tariffs did not increase steel jobs, with employment in the sector below pre-tariff levels, and downstream industries reliant on steel have been hit hard.
Despite initial tariffs, the US trade deficit increased from $480 billion in 2016 to around $653 billion by the end of Trump's first term in 2020, partly due to a stronger US dollar making exports less competitive.
While Trump is intensifying tariffs in his second term, the former Biden administration maintained many of Trump's tariffs and even introduced new ones, including on electric vehicles (EVs) from China.
Key markets to monitor amid tariff changes
Here are some of the best markets to watch as Trump imposes increased tariffs:
Unless the effect of tariffs has been priced in, significant volatility may occur as the world digests Trump’s new tariffs. The Chicago Board Options Exchange (CBOE) volatility index (VIX) measures the market's expectations for volatility over the next 30 days, serving as the first port of call for traders in times of uncertainty.
The VIX is even referred to as the ‘fear gauge’ as it is usually a decent barometer of investor sentiment. Derived from the implied volatility of near-term S&P 500 index options, the VIX tends to rise when stocks fall, making it a popular hedging choice.
Tariffs are likely to increase the strength of the US dollar, but their impact on major currencies, including the euro, pound sterling, and the Australian dollar, might disrupt global trade. The US dollar/Canadian dollar (USD/CAD) pair is interesting as Canada responds with 25% tariffs on C$155 billion of US goods.
Canada is also considering specific tariffs on key goods produced in strong Republican states, adding a new political dimension to forex trading.
Gold remains a popular inflation hedge, trading at a record high due to central bank buying. If tariffs drive inflation higher, gold demand may rise. Tariffs could also weaken the US dollar over time, making gold more attractive as a safe haven.
Conversely, if the US economy strengthens, gold may become less attractive than US dollar-denominated bonds.
Nasdaq 100 futures opened down 600 points, exposed to weakening sentiment given the high valuations of the tech stocks dominating the index. Eventhough the Dow Jones and S&P 500 also opened down on Sunday night, Nasdaq 100 futures took the largest loss.
Earnings season will add volatility, with Alphabet and Amazon due to report. China's tariffs could worsen the market mood, impacting the semiconductor and tech component sectors.
Many US-based semiconductor companies—including iShares MSCI Global Semiconductors UCITS ETF constituents Nvidia, Advanced Micro Devices (AMD), Intel, and Qualcomm—rely heavily on China for both manufacturing and sales. Tariffs on tech components could increase costs, disrupt supply chains, and impact revenue. Taiwan Semiconductor Manufacturing Company (TSMC) might find itself in a particularly difficult position.
Tariffs will likely cause volatility in the semiconductor/artificial intelligence space, but long-term investors might see opportunities in accelerated domestic production and increased US-based AI investments.
With Tesla Chief Executive Officer (CEO) Elon Musk championing Trump through his election campaign and running the new ‘Department of Government Efficiency,’ Tesla may be in for some turbulent times. The EV trailblazer could be hit hard by tariffs on auto parts imports, and beyond this, over the weekend former Canadian Finance Minister Chrystia Freeland suggested that the country could ‘impose a 100 per cent tariff on all Tesla vehicles.’
Given Tesla’s arguably weak quarterly results in January, any tariffs specifically aimed at the company in an effort to target Musk could prove highly damaging.
Trump’s social media app remains loss-making, , but the global impact of the tariffs could lead to meme-levels of trading activity this week. Traders bought up the stock before the election, but it has since sold off. This stock could become a top name on social media platforms like Twitter and Reddit.
Be warned though that meme trading activity can be both very high risk and very unpredictable, with very few or even no fundamentals attached to price movements.
Alibaba, China’s answer to Amazon, could face significant challenges from increased tariffs. The new 10% tariff could eliminate the exemption for packages valued at under $800, which allows companies like Alibaba to ship goods directly to US consumers without incurring duties. The company may be doubly affected if Chinese tariff reactions impact the other side of its business.
Alibaba’s recent launch of a new chatbot, that outpaces DeepSeek, complicates its investment landscape further.
This trade war is nothing new. The US has been attempting to prevent China from accessing its most advanced semiconductors to maintain an edge in the artificial intelligence arms race. China has responded by imposing export controls on various critical and defence minerals, including rare earths, antimony, and tungsten.
While tariffs may damage the global economy and cause major companies like Rio Tinto and Glencore to struggle, ex-China sources of critical minerals could become more desirable if China escalates, leading to substantial grant funding for US projects to reduce dependency on China.
Trump promised to get inflation down with a "Drill, Baby Drill" strategy. If Canadian imports become significantly more expensive, oil prices may rise in the short term, though Trump plans to allow more oil and gas drilling on federal lands to increase US oil production by an additional three million barrels per day.
While the US is the largest individual oil producer, the Organisation of the Petroleum Exporting Countries (OPEC) controls the majority. Any signs from OPEC will be closely watched, especially if it appears the global economy and oil prices start to fall.
Trump tariffs summed up
US President Donald Trump is imposing a 25% tariff on goods from Canada and Mexico and a 10% additional tariff on Chinese goods. Currently, around 2%—or $80 billion—of US tax revenue is derived from tariffs. While some economists believe tariffs bolster domestic manufacturing and security, others argue the downsides outweigh the benefits. The global impact will be significant, though the long-term effects remain uncertain.
Best Trump Tariff markets to watch
Here’s some of the best markets to watch as Trump imposes increased tariffs:
VIX
Unless the market has priced the effect of tariffs in — and in this market, it’s hard to rule anything out — investors may be likely to see significant volatility as the world digests the true impact of Trump’s new tariffs. The VIX (CBOE Volatility Index) measures the market's expectations for volatility over the next 30 days, making it perhaps the first port of call for traders in times of uncertainty.
The VIX is even referred to as the ‘fear gauge’ as it’s usually a decent barometer of investor sentiment. It’s derived from the implied volatility of near-term S&P 500 index options — such that when stocks fall, the VIX tends to rise. This also makes the index a popular hedging choice.
USD/CAD
Tariffs are almost certainly going to increase the strength of the US Dollar, but it’s the impact on other major currencies, including the Euro, Pound Sterling and the Australian Dollar that might upend global trade. The ‘Loonie’ currency pair — USD/CAD — is perhaps the most interesting forex market to watch as Canada is responding to Trump’s tariffs with 25% tariffs on CAD$155bn of US goods, but all being relative the Canadian Dollar may lose value compared to the US Dollar.
Canada is also considering specific tariffs on key goods produced in strong Republican states, which could create a new political dimension to forex trading.
Gold
Gold remains the real asset inflationary hedge of choice, but the precious metal now trades at a record high — arguably as a result of central bank buying — and it’s hard to know which way the trade will go next.
On one hand, if tariffs send inflation higher, gold’s role as an inflationary hedge could see demand rise and therefore it’s price. You will also see more market uncertainty, and tariffs could even make the US Dollar weaker over time if they slow economic demand — making gold more attractive as a safe haven asset, but also because it would become cheaper for foreign buyers.
On the other hand, tariffs could strengthen the US economy by boosting domestic production, and the US Dollar seems to be strengthening for now. And if inflation comes roaring back, then gold could become less attractive than bonds denominated in USD terms if their yields rise.
NASDAQ 100 futures
While the Dow and S&P 500 also opened down on Sunday night, NASDAQ 100 futures took the largest loss, opening some 600 points down — and is arguably the most exposed to weakening sentiment given the sky-high valuations of the Magnificent Seven tech stocks which dominate the index.
The volatility is only going to be exacerbated by earnings season — titans Alphabet and Amazon are both due to report back to investors this week. Given the seismic impact of China’s DeepSeek on the artificial intelligence sector, including both recriminations and accusations, investors are looking to China for retaliatory tariffs that may worsen the global mood.
iShares Semiconductor ETF
Many US-based semiconductor companies — including iShares MSCI Global Semiconductors UCITS ETF constituents Nvidia, AMD, Intel and Qualcomm — rely heavily on China for both manufacturing and sales. Tariffs on tech components could increase costs, disrupt supply chains, and impact revenue. Perhaps the most interesting effect might be on Taiwan Semiconductor Manufacturing Company (TSMC), which may be caught between a rock and a hard place.
Tariffs will doubtless see volatility in the semiconductor/artificial intelligence space, but longer term investors might see accelerated domestic production and increased US-based AI investments.
Tesla
With Tesla CEO Elon Musk championing Trump through his election campaign and running the new ‘Department of Government Efficiency,’ Tesla may be in for some turbulent times. The EV trailblazer could be hit hard by tariffs on auto parts imports, and beyond this, over the weekend former Canadian Finance Minister Chrystia Freeland suggested that the country could ‘impose a 100 per cent tariff on all Tesla vehicles.’
Given Tesla’s arguably weak quarterly results in January, any tariffs specifically aimed at the company in an effort to target Musk could prove highly damaging.
Trump Media & Technology Group
Trump’s ‘Trump Media & Technology Group’ social media app remains loss-making but given the global impact of the tariffs could see meme levels of trading activity this week. For context, traders bought up the stock in the run-up the election, but it has since sold off — and the odds are that this stock could be a top name on social media forms like Twitter and Reddit.
Be warned though that meme trading activity can be both very high risk and very unpredictable, with very few or even no fundamentals attached to price movements.
Alibaba
Alibaba is China’s answer to Amazon, and increased tariffs on the company could do some damage. For context, the new 10% tariff could remove the exemption for packages valued at under $800, which allows companies like Alibaba to ship goods directly to US consumers without incurring duties. The company may be hit twice though, because any Chinese tariff reaction could hit the other side of its business.
It's also worth noting that Alibaba very recently announced it had developed a new Chatbot that outpaces DeepSeek – which further complicates the investment.
Mining sector
This trade war is nothing new. Over the past few years, the USA has been (with limited success) attempting to prevent China from accessing its most advanced semiconductors in order to maintain an edge in the artificial intelligence arms race. China has responded (again, with limited success) by imposing export controls on various critical and defence minerals including a handful of rare earths, antimony and tungsten.
While the wider story may be that tariffs damage the global economy and cause the share prices of major titans like Rio Tinto and Glencore to struggle, it’s also worth noting that if China ups the ante, ex-China sources of critical minerals will become more desirable — and indeed, several US projects have either been granted or will soon be granted substantial grant funding to reduce US dependency on China.
Oil & Gas
Trump promised the electorate that as part of his plan to get inflation down he would ‘Drill, Baby Drill.’ If Canadian imports become significantly more expensive you might see oil prices rise in the short term, though Trump is planning to allow more oil and gas drilling on federal lands, by executing Scott Bessent's ‘3-3-3’ plan to increase US oil production by an addition 3 million barrels per day from the current record 13.3 million.
While the US is already the largest individual oil producer in the world, the lion’s share of production remains in the hands of the OPEC cartel and any signs given from this quarter will be closely watched — especially if it appears that the global economy, and therefore oil prices, starts to fall.
Trump Tariffs summed up
- US President Donald Trump is imposing a 25% tariff on all goods coming from immediate neighbours Canada and Mexico, and a 10% additional tariff on goods from China
- The US currently generates circa 2% — or $80 billion — of its total tax revenue from tariffs
- Some economists consider that tariffs encourage domestic manufacturing and enhance national security, though others argue the downsides far outweigh the potential positives
- Given the size and importance of the US economy, the impact will be worldwide, and the long-lasting effects are far from certain
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