As the US election campaign heats up, Goldman Sachs strategist warned in a report on Friday the 21st of June that a key concern for the US election is that if tariffs were imposed on US companies' overseas operations, it would pose a significant risk to the US stock market.
The strategists explained that if tariffs were implemented, the stocks of companies with high income from international markets might face resistance. This resistance mainly comes from two aspects: one is the possible retaliation tariffs; the other is the geopolitical tensions that may be exacerbated thereby. In addition, companies that rely on international suppliers may also face difficulties due to tariffs.
The impact of retaliatory tariffs: when a country (such as the United States) decides to impose higher tariffs on imported goods from another country, the taxed country may also impose higher tariffs on goods from the original taxing country in order to retaliate or protect its own interests, affecting US exports and increasing trade deficits, thereby negatively impacting the US dollar. This mutual taxation behavior is called retaliatory tariffs. For US companies that rely on international markets for sales, if their products become more expensive in other countries, the competitiveness of these products will decrease, resulting in reduced sales and revenue, which will in turn affect stock prices and company performance.
The impact of geopolitical tensions: the implementation of tariff policies is not just an economic issue, but often involves political factors, and sometimes even touches on national security issues. These complex interactions can cause tension between two or more countries. Geopolitical tensions can make the market feel uncertain and unstable, thereby affecting investor confidence and market performance. For companies operating globally, political tensions may hinder their business operations, increase operating costs, and even cause certain markets to be unable to operate normally.
Difficulties facing companies that rely on international suppliers: Many companies rely on global supply chains to obtain raw materials or finished products, and then sell them to different markets. If these raw materials or products imported into the United States require higher tariffs to be paid, costs will naturally increase. This cost increase may eventually be passed on to consumers, which may lead to a decline in demand, or the company may choose to absorb this part of the cost, thereby reducing profits. In either case, the company's financial situation may be negatively affected.
Goldman Sachs also mentioned that strategists believe that although there is great uncertainty about the scale and scope of tariff increases, if Trump wins, it seems likely that tariffs will increase. Previously, it was reported that Trump was considering imposing tariffs of at least 10% on all goods imported into the United States from other countries if he is re-elected.
In addition, Goldman Sachs also pointed out that the outcome of the US presidential election may have a significant impact on the relative performance of the US dollar and companies oriented towards domestic and international markets. For example, in 2018, when the United States, under Trump's leadership, announced the imposition of tariffs and other trade barriers on China, domestic sales of companies outperformed international sales by 9 percentage points.
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