6 Stocks Poised to Benefit From a Trade War in Unexpected Ways

Key Points

• Levying tariffs on imports can lead to higher inflation.
• Higher inflation causes consumers to trade down and trim discretionary spending.
• Rising inflation may cause the Federal Reserve to reverse course and raise interest rates.

President Trump put a 30-day pause on levying 25% tariffs on Canada and Mexico but proceeded to levy an additional 10% tariff on Chinese imports. Trump has also acknowledged that he would be levying tariffs on European imports in time. The repercussions of tariffs have been a hotly debated topic. In the event that Trump follows through with his planned 25% tariffs on Canada and Mexico as well as levying similar tariffs to European imports, here are six stocks that could benefit and probably not in the direct way you think.

Nucor: Soaring Steel Prices Bolster Margins

As the nation’s largest steel producer, Nucor Co. NYSE: NUE would benefit from the protectionist impact of tariffs just as they did in 2018. By taking on an additional 25% tariff on imported steel, manufacturers would be forced to buy domestic steel. The influx of demand would lead to higher prices.

This is what happened during the 2018 tariffs, when imported steel was too expensive after the 25% tariffs, domestic steel producers also took the opportunity to raise their prices. This resulted in short-term margin expansion, which also led to soaring inflation. However, sustained higher steel prices can also impact demand in the long run.

CarMax: Higher Steel Prices Mean Higher New Car Prices

Higher steel prices would result in higher costs being passed onto the consumer. New car prices would increase, making it tougher on consumers. It’s estimated that the 25% tariffs imposed on Mexico and Canada could result in increasing the cost of a new car by $1,000 to $9,000.

This would cause many consumers to consider buying a used vehicle for cheaper without getting smacked by the immediate depreciation once the car is driven off the lot. CarMax Inc. NYSE: KMX is the nation’s largest used car dealership. They would naturally be the benefactor as customers migrate to their showrooms to purchase used vehicles. The growing demand would result in higher used car prices, leading to margin expansion for CarMax.

Reborn Coffee: Inflation Sends Commodity Prices Rising

It is widely believed that levying tariffs on imports will drive inflation higher, especially if retaliatory tariffs are levied on American exports. This can also lead to higher commodity prices, which can bolster margins for coffee roasters like Reborn Coffee Inc. NASDAQ: REBN. 

Coffee prices hit a 27-year high at the end of November 2024. However, that was also driven by forecasts of tightening supply in 2025.

If supply constraints persist, elevated coffee prices could provide continued tailwinds for roasters, though higher costs may eventually pressure consumer demand.

Kroger: Food Inflation Is Profitable for Food Distributors and Grocers

Higher inflation may force consumers to tighten their budgets again, but they’ll still need to spend on the necessities in the consumer staples sector. Major supermarket chains like Kroger Co. NYSE: KR would benefit from expanding margins as they pass on cost increases to customers and add a little extra for themselves.

Additionally, they would also gain from consumers trading down from name brand food items to Kroger's higher margin private label items. This shift could further strengthen Kroger’s pricing power and boost overall profitability amid economic uncertainty.

Charles Schwab: Rising Interest Rates Boost Net Interest Margin  

If inflation starts rising sharply, it will leave the Federal Reserve no choice but to reverse its interest rate cut policy and raise interest rates. Higher interest rates mean higher net interest income (NII) and margins for banks and brokers. Charles Schwab Inc. NYSE: SCHW would be a clear benefactor from higher NII as its assets under management (AUM) have grown to more than $10 trillion. They would also collect more interest on margin loans.

This is not a guess but a reality based on precedent. History has shown that rising rates tend to benefit financial institutions, making this scenario more than just speculation.

Allstate: Interest Income Climbs

Aside from banks, insurance companies are in the business of holding a ton of cash and cash equivalents. Insurance companies like Allstate Co. NYSE: ALL collect a ton of premium, which it invests in cash and liquid interest-bearing instruments and securities like money market funds, CDs, Treasury, and municipal and investment grade bonds.

Higher interest rates equate to higher investment income. As interest rates rise, these investments generate higher yields, boosting overall investment income and profitability.