Companies and consumers tend to suffer form import duties, but a few businesses benefit

Tension over trade escalated this week when President Donald Trump came within hours of imposing tariffs on imports from Canada and Mexico. He was about to levy an additional 25% tax on some goods produced in Canada and Mexico, and an additional 10% tariff on some products from China.

However, recent developments indicate a temporary reprieve. The U.S., Canada and Mexico have agreed to a 30-day pause on the implementation of the tariffs to allow for further negotiations.

Given the seesaw nature of this week’s decisions , several industries could face significant disruptions, while others might find opportunities.

Potential losers from tariffs

At risk: The auto industry

The auto sector is deeply integrated across the U.S., Canada and Mexico. Many American car manufacturers rely on Canadian and Mexican suppliers for critical components, and vice versa. Tariffs on auto parts or finished vehicles could lead to higher costs, supply chain disruptions, and potential price hikes for consumers.

Stocks to watch:

• General Motors (GM)
• Ford (F)
• Tesla (TSLA)—Because of its production in Mexico
• Magna International (MGA)—A major Canadian auto parts supplier

I'll be monitoring TSLA and GM closely because their implied volatility (IV) levels are currently elevated, presenting potential opportunities for selling option premiums. With the market adjusting to the uncertainty surrounding tariffs, options strategies like selling puts or iron condors could be advantageous.

At risk: Manufacturing and industrial goods

Canada and Mexico play crucial roles in supplying raw materials and components for U.S. machinery, electronics and industrial goods. Tariffs could raise input costs for manufacturers, affecting margins and competitiveness.

Stocks to watch:

• Caterpillar (CAT)—Heavy machinery exports
• Deere & Co. (DE)—Agriculture equipment reliant on cross-border trade
• Honeywell (HON)—Industrial and aerospace products

At risk: Agriculture and food

The agriculture sector is highly sensitive to trade policy. Canada and Mexico are among the biggest buyers of U.S. farm products like corn, soybeans, dairy and meat. Retaliatory tariffs from these countries could hurt American farmers and agribusinesses.

Stocks to watch:

• Archer Daniels Midland (ADM)—Agricultural commodities
• Tyson Foods (TSN)—Meat processing and exports
• Bunge Limited (BG)—Global grain trading

At risk: Energy and natural resources

Canada is a major supplier of oil and natural gas to the U.S., and Mexico is a growing energy trade partner. Tariffs on Canadian crude or Mexican refined products could affect energy stocks and commodity prices.

Stocks to watch:

• Enbridge (ENB)—Canadian pipeline operator
• TC Energy (TRP)—Cross-border oil and gas infrastructure
• ExxonMobil (XOM) and Chevron (CVX)—U.S. oil giants affected by price volatility

Potential winners from tariffs

While most sectors face risks, some companies could benefit from increased protectionism. U.S.-based manufacturers and domestic suppliers might gain an advantage if foreign imports become more expensive.

Potential beneficiaries:

• U.S. steel & aluminum producers (e.g., Nucor (NUE) and U.S. Steel (X))
• Domestic automakers with limited foreign reliance
• Renewable energy and electric vehicle (EV) supply chains that rely less on imports
  

The impact of these new tariffs will depend on how long they remain in effect, the outcomes of ongoing negotiations during the 30-day pause, and whether Canada and Mexico retaliate. Markets will be watching closely for official announcements and trade developments that could alter the economic landscape.

I'll continue monitoring TSLA and GM for potential options premium selling opportunities, as their implied volatility levels remain elevated amid the uncertainty. With careful positioning, we can take advantage of the increased IV while managing downside risk.

Errol Coleman appears on the tastylive network shows Today’s Assignment and Trades on the Go.