Strategists at Goldman Sachs have highlighted the potential cost of tariffs for US companies doing business abroad as the US election campaign gains momentum. According to the investment banking giant, tariffs could significantly impact the performance of stocks with high exposure to international income.
“Tariffs would create a headwind for the performance of stocks with high exposure to international income 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 could face additional challenges due to potential tariffs.
Goldman Sachs noted that prediction markets currently imply slightly higher odds of a Trump presidency compared to a Biden presidency. They also emphasized the uncertainty surrounding the size and scope of potential tariff increases, but indicated that such increases appear likely if Trump wins.
“Although there is substantial uncertainty about the size and scope, tariff increases appear likely in the event of a Trump victory,” the note adds.
The outcome of the US presidential election is expected to have a substantial impact on the US dollar and the relative performance of domestically exposed versus internationally exposed companies.
In 2018, when the United States announced tariffs and other trade barriers against China under the Trump administration, Goldman Sachs found that its domestic sales basket outperformed its international sales basket by 9 percentage points.
Strategists suggest that investors closely monitor the election developments and watch the stocks of companies with significant international exposure.
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