These policies, which aim to protect the local industry, have sparked widespread discussions about growth opportunities and potential challenges that may face investments in various sectors. While some experts believe that these policies may open doors for economic growth and enhance the strength of small local companies, others express their fears about Its inflationary repercussions and the decline in the attractiveness of international investments. With this disparity in expectations, investment options seem more like calculated bets that require deep analysis and careful planning.
But under these circumstances, what are the best strategies that investors can follow to achieve sustainable returns? Can small businesses be the biggest winners in this new economic landscape? Or might tariff risks make it difficult to predict the investment future?
How to protect your portfolio from risks?
Money managers and investment portfolios are working on developing strategies to confront the challenges associated with the tariff agenda of US President-elect Donald Trump, including John Duffy, money manager and CEO of Astoria Portfolio Advisors, who is concerned that the policies of the new US administration may be “inflationary in nature.” “Very,” and he believes that it is important to choose investments carefully, according to a report published by CNBC and seen by Sky News Arabia under the title “How to protect your portfolio from the risks associated with the tariff agenda.” Tariffs for President-elect Donald Trump?
Duffy, who also serves as the company’s chief investment officer, believes that “small-cap industries make more sense than large-cap industries,” expecting that the Republican majority will help push a policy agenda that supports growth and strengthens local trends, which will benefit companies. Small capitalization.
It seems that Wall Street It agrees with this trend so far; Since the US presidential election, the Russell 2000 index, which tracks the performance of small-cap stocks, rose about 4 percent until last Friday’s close, according to the American network report.
Duffy believes that remaining in the American market is a smart option, despite the risks associated with tariffs. He said: “We rely heavily on the American market as the best option in the coming years until the midterm elections.” On the other hand, he plans to stay away from bonds due to… Challenges associated with the growing budget deficit, warning: “You should be careful if you own bonds.”
During his election campaign, Donald Trump pledged to impose tariffs and customs duties to protect American industry, including comprehensive duties of between 10 and 20 percent on America’s partners and allied countries whose trade balance with America is imbalanced, in addition to a 60 percent tax on Chinese imports. During his first term, he imposed Customs duties on steel and aluminum imports from China and European countries.
Continuing the “America First” policy
Speaking to the “Eqtisad Sky News Arabia” website, economic expert Dr. Muhammad Jamil Al-Shabashiri believes that the re-election of Donald Trump as President of the United States carries with it a major shift in American and international economic policy, expecting that the “America First” policies adopted by Trump, which include an escalation of policies, will continue. Protectionism by imposing additional customs tariffs on imports, with the aim of supporting local manufacturing.”
At the same time, tax laws are likely to be amended to attract foreign investment to the United States, while strengthening the traditional energy sector such as oil and coal, at the expense of renewable energy sources, he said.
Dr. Al-Shabashiri referred to the results of the study “The Impact of the 2018 Trade War on Prices and Welfare in the United States,” which was prepared by Mary Amiti, Stephen J. Redding, and David Weinstein, which highlights some of the challenges that may arise from protectionist trade policies if the approach continues. Trump.
- Price increase: The Trump administration imposed 25 percent tariffs on Chinese goods in 2018, which increased prices in the United States by 0.3 percent to 0.4 percent. The increase was most pronounced in goods on which tariffs were imposed directly, such as electronics and clothing.
- Impact on production: Production costs have risen in many US industries as a result of these tariffs. Which in turn affected prices in local markets, leading to an increase in import and production costs in many sectors.
- Reducing consumer well-being: The study estimated that the trade war reduced the well-being of American consumers by approximately $1.4 to $1.8 billion annually due to increased prices resulting from tariffs, which burdened American families.
- Benefits for US producers: Despite the negative effects on consumers, some US industries have benefited from reduced Chinese competition, especially in the steel and aluminum sectors, where some companies achieved an increase in their profits of up to $1.4 billion through raising prices and improving revenues.
- Global Impacts: Internationally, this trade war has reduced global trade by 0.2 percent to 0.3 percent, reflecting the impact of tariffs on the global economy.
Investment opportunities and challenges
In light of these impacts, US investors can determine their future opportunities based on which sectors will benefit from Trump’s protectionist policies. The sectors supported by the government, such as traditional energy, defense, and infrastructure, are expected to witness a greater influx of investments, according to Al-Shabashiri, who indicated continued support for the traditional energy sector, as it is one of the main points in Trump’s economic policy, which enhances growth opportunities in these industries. In addition, the defense and infrastructure industries may benefit similarly from increased government spending.
However, the economist points out that “there are clear threats to some sectors, such as technology companies that rely on international supply, which may be harmed by the increase in production costs due to tariffs. Also, the increasing tensions with China may lead to disruptions in global supply chains, Which may negatively affect companies that rely on these chains to supply raw materials or semi-finished products.
He added: “While the current situation provides an opportunity to strengthen domestic industries in the United States, especially in government-supported sectors, it also carries significant risks for other sectors, requiring investors to be cautious. If small businesses are looking to benefit from these policies, they should “It focuses on sectors that see direct support from the government, such as heavy industry and agriculture. However, these companies must be aware of the potential challenges associated with increased production costs, which may affect their competitiveness in international markets.”
For his part, economic and financial expert Hussein Al-Qamzi said in his interview with “Iqtisad Sky News Arabia” website: “Imposing exorbitant customs tariffs on imports may become one of the most prominent features of the next Trump era. Whether this decision is correct or not, it aims mainly to protect American industry.” For the investor, he must focus on how these policies create investment opportunities in some sectors, and how they can negatively affect other sectors.
The imposition of tariffs increases the cost of imported products, giving small businesses within the United States a greater competitive advantage in the domestic market. Therefore, investors in the American market must direct their attention towards the sectors that benefit from these protectionist policies, especially the sectors that depend on the local market and receive direct government support, according to Al-Qamzi.
On the other hand, the economic and financial expert adds: “Investors should be careful when investing in companies that rely heavily on imports or exports, such as technology companies and the automobile industry. These companies will face an increase in costs as a result of customs tariffs, which will directly affect their profit margins.” .
He also prefers to avoid investing in emerging markets and foreign companies that depend on exporting to the United States, as they are expected to be negatively affected by the imposition of customs duties on them, which may weaken their competitiveness and limit their profits, according to him.
Where should investments be concentrated?
Al-Qamzi spoke about the best investments that should be focused on during the Trump era, according to the following:
- Companies benefiting from support and protective policies:
The industrial and agricultural sectors that receive government support may witness significant growth due to increased demand for local products.
Trump’s policies to support energy self-sufficiency and transform the United States into a strong competitor in oil and gas exports make this sector an attractive opportunity for investors.
- US bonds and debt instruments:
With expectations of major fluctuations in stock markets as a result of the impact of major American companies that depend on exporting to Chinese and European markets, US bonds can be a safe haven for investors.
- Global markets not affected by tariffs:
Investors can direct their investments towards international markets that will not be affected by tariff policies, providing them with diversification to reduce risks.
The economist Al-Qamzi concluded, “Investing in the era of Trump requires a thoughtful strategy that focuses on companies that benefit from protectionist policies and government support, while avoiding sectors that may be harmed by high costs or low competitiveness in global markets. Investors must remain flexible in their decisions and benefit from the resulting opportunities.” about these economic changes.
