Goldman Sachs strategists have highlighted the potential harm from tariffs to US companies doing business abroad as the US election campaign heats up. Tariffs could have a significant impact on the performance of internationally high-performing stocks, according to the investment banking giant.
“Tariffs will create a headwind for international high-flying stocks due to the risk of retaliatory tariffs as well as increased geopolitical tensions,” the strategists said in a note on Friday.
This concern extends to companies that rely heavily on international suppliers, who may face additional challenges due to potential tariffs.
Goldman Sachs noted that forecast markets currently suggest slightly better odds for a Trump presidency compared to a Biden presidency. They also underscored the uncertainty surrounding the size and scope of potential tariff increases, but noted that such increases appear likely if Trump wins.
“While there is significant uncertainty about the size and scope, tariff increases appear likely if Trump wins,” the note said.
The outcome of the US presidential election is expected to have a significant impact on the US dollar and on the relative performance of companies operating domestically compared to companies operating internationally.
In 2018, when the US announced tariffs and other trade barriers against China under the Trump administration, Goldman Sachs saw its domestic sales basket outperform its international sales basket by 9 percentage points.
Strategists suggest investors should closely monitor election developments and keep an eye on stocks of companies with a significant international presence.