What Stocks Will Benefit From Tariffs?

Inflation, as previously discussed in my article "How Do Tariffs Impact Investments?," represents a sustained increase in the overall price level of goods and services across an economy over time.

This phenomenon erodes the purchasing power of income and savings, making it more difficult for individuals to afford basic necessities and maintain their accustomed standard of living.

For economies, unchecked inflation can breed uncertainty, diminish investment, and ultimately lead to economic instability.

Several interconnected factors can contribute to the onset and persistence of inflation:

• Supply chain disruptions, which limit the availability of goods and services.
  
  
• Increased demand, which puts upward pressure on prices.
  
  
• Geopolitical tensions, which can disrupt global trade and create instability in markets.
  
  
• Government policies, such as excessive money creation or expansionary fiscal measures, which can fuel inflation.

While inflation has shown some signs of cooling recently, these underlying factors suggest we could be on the cusp of a renewed surge. 

This makes inflation a significant concern that demands careful attention and proactive strategies to safeguard your financial well-being. So let’s talk about how tariffs impact inflation and what stocks will benefit from tariffs…

Commodities, encompassing precious metals, agricultural products, and energy resources like oil and gas, are often considered a hedge against inflation. 

This is because they are tangible assets with inherent value whose worth is not dependent on the performance of a specific company or the volatility of the stock market. 

During periods of high inflation, commodity prices tend to increase along with the general rise in prices. 

This occurs as investors seek to protect their wealth from the erosion of purchasing power caused by inflation, leading to increased demand for commodities. 

Historically, commodities have outperformed equities and bonds during times of high inflation…

In fact, a 1-percentage-point surprise increase in U.S. inflation has, on average, led to a 7-percentage-point gain in real return for commodities while causing stocks and bonds to decline by 3 and 4 percentage points, respectively.

Gold's Appeal During Inflationary Periods

Gold has consistently demonstrated its ability to maintain its value and potentially appreciate during times of high inflation. 

This is because gold is a tangible asset, unaffected by the erosion of purchasing power that impacts fiat currencies, which central banks can print without limit. 

Gold possesses intrinsic value that is independent of any specific currency or economy.

As a finite resource with numerous industrial and investment applications, its worth tends to hold firm as the prices of other goods and services rise due to inflation… 

As the real value of cash holdings decreases, gold, which cannot be printed or diluted, retains its intrinsic value. 

This makes it a desirable option for investors looking to safeguard their wealth and potentially profit from rising inflation. 

Gold tends to perform particularly well when inflation is caused by negative supply shocks or concerns about the credibility of central banks… 

For instance, during the high inflation of the late 1970s and early 1980s in the U.S. and U.K., the price of gold surged as investors sought refuge in the precious metal. 

Gold is often regarded as a "safe haven" asset during times of economic uncertainty. When inflation is on the rise, the purchasing power of fiat currencies tends to decline, making tangible assets like gold more appealing. 

This increased demand can drive up the price of gold, potentially providing investors with capital appreciation. 

Bank of America has predicted that gold will reach $3,700 per troy ounce by the end of the year — a rise of around 13% from the start of the year — citing strong demand from central banks in emerging markets and Asian households as well as gold's appeal as a hedge against inflation.

Silver: "The Poor Man's Gold" With Potential During Inflation

Silver, like gold, is considered an inflation hedge; however, its price can behave differently due to its dual role as both a precious metal and an industrial commodity. 

In times of high inflation, silver prices often increase as investors seek alternatives to the declining value of fiat currency. 

The industrial demand for silver in sectors such as electronics, solar panels, and medicine can also influence its price. 

Analysts are estimating that global silver demand reached nearly 1.2 billion ounces in 2024 and think that 2025 could be an even stronger year. 

This growth is primarily driven by industrial applications, especially in the expanding solar energy sector. 

We are observing the fourth consecutive year of a structural market deficit in silver, meaning that demand exceeds what producers can resupply. This deficit is expected to widen by 17%, reaching 215.3 million ounces. 

When demand surpasses supply, prices tend to increase, creating a potentially compelling investment opportunity. 

As inflation rates rise and investors seek hedges, demand for precious metals like silver tends to grow.

Oil: The Driving Force Behind Inflation and Potential Profits

Crude oil is a vital component in the production of countless goods and services. Therefore, increases in oil prices directly contribute to inflation. 

Higher oil prices raise the production and transportation costs for businesses, which are often passed on to consumers through increased prices. 

There is a cause-and-effect relationship between oil and inflation: higher oil prices lead to higher inflation, and higher inflation can lead to higher oil prices. 

Historically, oil prices have had a greater effect on the Producer Price Index (PPI) than the Consumer Price Index (CPI). This is because oil is a key input in manufacturing, making it a significant cost factor for producers. 

Oil prices tend to have a greater effect on the cost of goods than the cost of services. Despite the shift toward electric vehicles, global oil demand remains strong and is expected to continue growing in the coming years. 

Goldman Sachs Research projects that oil demand will reach 110 million barrels a day by 2034. 

This sustained demand, along with potential supply disruptions and geopolitical tensions, suggests that oil prices are likely to remain elevated, potentially providing investors with profit opportunities from rising prices.

The Impact of Tariffs on Inflation and Commodities

Recent tariffs imposed by the U.S. on goods from Canada, Mexico, and China are expected to contribute to inflationary pressures… 

These tariffs, implemented in the form of import duties, are projected to have a broad impact, raising costs for both final and intermediate goods. 

The increased consumer prices resulting from tariffs are a concern for investors, especially those worried about a resurgence of inflation that could prevent the Federal Reserve from cutting interest rates. 

Economists estimate that tariffs could contribute to core inflation and negatively impact gross domestic product (GDP). 

The exact economic impact of these mega-tariffs remains uncertain, making it difficult for the Federal Reserve to predict price trends. 

The imposition of tariffs can lead to a decline in corporate profits due to increased production costs and retaliatory measures from affected nations… 

If tariffs persist for an extended period, it could trigger a sell-off in stocks and other higher-risk assets. 

The potential for tariffs to drive up consumer prices could disproportionately affect lower-income households, who allocate a larger share of their income to physical goods.

Details of the recently imposed tariffs include:

• The U.S. imposed 25% tariffs on Mexican and most Canadian imports and 10% on goods from China.
  
  
• Canada and Mexico initially received a 30-day reprieve on tariffs after agreeing to increase efforts to stop drug trafficking. However, the tariffs on China are still set to begin.
  
  
• Canada has announced retaliatory tariffs of 25% on $155 billion of U.S. goods.
  
  
• Mexico and China have indicated that they will implement countermeasures.
  
  
• The tariffs have introduced uncertainty in markets and concerns that they will undermine economic growth.
  
  
• The tariffs have led to a weakening of the Chinese yuan to a record low, while the U.S. dollar has strengthened against the Canadian dollar and the Mexican peso.
  
  
• The possibility exists that the tariffs could be temporary due to the White House setting general conditions for their removal.
  
  
• The U.S. president has the power to increase the size and scope of the tariffs if affected countries retaliate.

The Federal Reserve's Response to Tariffs and Inflation

Federal Reserve officials have expressed concerns regarding the inflation risks associated with the imposed tariffs. This concern suggests that these risks might delay future interest rate cuts… 

Some Federal Reserve officials believe that the uncertainty surrounding the impact of tariffs necessitates a more cautious approach to lowering interest rates. 

The Federal Reserve is taking a “wait and see” approach, and some officials have indicated that they are prepared to remain on the sidelines… 

There is currently no sense of urgency for adjustments to interest rates, especially given the uncertainty related to the impact of tariffs.

Capitalizing on the Commodity Boom

As inflation remains a threat to the global economy and trade wars increase its impact, commodities such as gold, silver, and oil offer investors a possible safe haven to protect their wealth and potentially benefit from rising prices… 

The unique properties of these commodities, coupled with strong demand and potential supply constraints, make them attractive investment options in the current environment. 

If you are interested in learning more about the best ways to invest in these commodities for maximum profit, you can access our premium report "Investing for Resilience: Three Ways to Profit BIG from Inflation's Second Coming" today. 

In it, you’ll find three of the best investments for the current times. Each of these three stocks benefits from both inflation and tariffs and is likely to make investors very happy.

The future is promising for those who are prepared to capitalize on the opportunities presented by the resurgence of inflation and the potential trade wars recent tariffs might cause. 

I hope that you’ll be one of them.