Strategists at Goldman Sachs highlighted the potential impact of tariffs on US companies doing business abroad as the US election campaign gains momentum. According to the investment bank giant, tariffs can significantly impact the performance of stocks with high exposure to international revenues.
“Tariffs will create headwinds to the performance of stocks with high exposure to international revenues due to the risk of retaliatory tariffs, as well as heightened geopolitical tensions,” strategists said in a note on Friday.
This concern extends to companies that rely heavily on international suppliers, which may face additional challenges from potential tariffs.
Goldman Sachs noted that prediction markets are currently indicating slightly higher odds for a Trump presidency than a Biden presidency. They also stressed the uncertainty surrounding the size and scope of potential tariff increases, but noted that such increases appear likely if Trump wins.
“Although there is significant uncertainty about the size and scope, tariff increases appear likely if Trump wins,” the memo added.
It is expected that the results of the US presidential elections will have a significant impact on the US dollar and the relative performance of local companies versus internationally exposed companies.
In 2018, when the United States announced tariffs and other trade barriers against China under the Trump administration, Goldman Sachs noted that its domestic sales basket outperformed its international sales basket by 9 percentage points.
Strategists suggest that investors should closely monitor election developments and monitor stocks of companies with significant international exposure.
