Goldman Sachs strategists have identified the imposition of tariffs as a significant risk to American companies with international operations as the US election campaign intensifies. According to the investment bank, tariffs could considerably affect the performance of stocks heavily reliant on global revenue.
“Tariffs would create a headwind for stocks with high international revenue exposure due to the risk of retaliatory tariffs and heightened geopolitical tensions,” strategists noted in a report on Friday.
This issue also extends to companies dependent on international suppliers, which could encounter additional hurdles from potential tariff implementations.
Goldman Sachs highlighted that prediction markets currently suggest a slightly higher probability of a Trump presidency over a Biden presidency. The bank also pointed out the uncertainty regarding the extent and specifics of possible tariff increases, yet suggested that such increases seem probable if Trump wins.
“Although there is substantial uncertainty in the size and scope, tariff increases appear likely in the event of a Trump victory,” the report added.
The outcome of the US presidential election is anticipated to significantly influence the US dollar and the comparative performance of domestically-focused versus internationally-exposed firms.
Reflecting on 2018, when the Trump administration announced tariffs and trade barriers against China, Goldman Sachs observed that its domestic sales basket outperformed its international sales basket by 9 percentage points.
The strategists recommend that investors closely follow election developments and remain vigilant about stocks of companies with substantial international exposure.
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