What are tariffs and how do they affect stocks?

Tariffs are taxes imposed on imported goods, making them more expensive compared to domestic alternatives. In this case, the 35% tariff on Canadian goods means U.S. companies face less foreign competition and can potentially raise prices or gain market share. This typically benefits domestic manufacturers in the affected industries (like steel and aluminum producers in this theme) by giving them a price advantage over their Canadian competitors.

Why are steel and aluminum companies featured prominently in this theme?

Steel and aluminum companies make up the majority of this theme because they're directly affected by the tariffs. These industries have historically faced significant competition from Canadian imports. When those imports become 35% more expensive due to tariffs, U.S. producers can sell their products at more competitive prices relative to the now-expensive Canadian alternatives. This can lead to increased market share, higher sales volumes, and potentially better profit margins.

What does "pricing power" mean for these companies?

Pricing power refers to a company's ability to raise prices without losing customers. With the 35% tariff on Canadian goods, U.S. manufacturers in this theme gain pricing power because their Canadian competitors must now charge significantly more. This means the U.S. companies can potentially raise their own prices (though likely less than 35%) and still remain more affordable than the tariff-affected imports, potentially increasing their profit margins while maintaining or growing their customer base.

What is protectionism and why does it matter for these stocks?

Protectionism refers to government policies designed to shield domestic industries from foreign competition, typically through tariffs, quota restrictions, or subsidies. In this case, the 35% tariff on Canadian goods is a protectionist measure aimed at giving U.S. companies an advantage. For the stocks in this theme, protectionism matters because it creates a more favorable competitive environment where they face less pressure from lower-priced imports, potentially allowing them to expand their market share and improve profitability.

What risks should I consider with this investment theme?

Key risks include potential policy reversals (tariffs can be changed or eliminated with new administrations), retaliatory tariffs from Canada that might harm U.S. companies with international operations, higher input costs for industries that rely on Canadian materials, and market adjustments as supply chains reorganize. Additionally, if U.S. companies raise prices significantly, it could reduce demand for their products. Finally, tariffs can contribute to broader inflation that might trigger interest rate increases, potentially affecting stock valuations across the market.

15 handpicked stocks

U.S. Protectionism: American Advantage

This carefully selected group of stocks represents companies set to benefit from the new 35% tariff on Canadian imports. Our professional analysts have identified these U.S. businesses as being uniquely positioned to capture greater market share and increase their pricing power as foreign competition becomes more expensive.

Han Tan | Market Analyst

Updated 2 days ago | Published at juillet 14