Which US Stocks Are Most at Risk From Tariffs?

To that end, we conducted a focused event study on the April 2 tariff announcement, seeking to measure whether companies with higher exposure to trade disputes experienced discernibly different short-term stock reactions compared with the broader market.

Methodology for US Tariff Exposure

1. Defining the Event Window
2. 1. We identified the tariff announcement date—April 2—and set a narrow event window around it. Specifically, we looked at one business day before the announcement (to capture any leaks or rumors) through one business day after (giving us a total of three trading days around the event).
   
   
3. Calculating Excess (Abnormal) Returns
4. 1. We merged daily stock returns with the Morningstar US Target Market Exposure Index to isolate each security’s excess return.
   2. We then summed each stock’s excess returns across the event window to arrive at a cumulative abnormal return, or CAR. This captures how much each stock out‐ or underperformed relative to the benchmark in the period surrounding the tariff announcement.
   
   
5. Analysts’ Qualitative Input
6. 1. To supplement the raw performance metrics, we asked our US equity sector directors to categorize each industry group’s primary reason for its observed price reaction:
   2. 1. Direct (first order) impact from tariffs (heightened import costs or direct benefits due to reduced foreign competition, for example)
      2. Indirect (second order) effects or other macro concerns (possible recession fears, broader shifts in consumer confidence)
      3. Company-specific reasons (unrelated events like a product recall, merger news, or management changes overshadowing tariff impact)
      
      
   
   
7. Final Screening
8. 1. We filtered the companies that:
   2. 1. Fell into industries flagged as having “direct (first order)” tariff exposure (that is, a rating = 1)
      2. Posted a CAR of less than negative 5% (indicating significant underperformance relative to the benchmark during the event window)
      
      
   
   

The result is a “tariff exposure basket,” a list of names that appear especially sensitive to the threat (or implementation) of new trade restrictions.

Tariff Takeaways by Industry

Below, we summarize the rationale for the industries that received the “direct (first order)” designation and therefore contributed companies to our final screening.

Vehicles and Parts

Global supply chains for auto components and final assembly are sensitive to new tariffs on steel, aluminum, and other imported parts. Heightened import duties tend to pressure margins quickly if costs cannot be passed on to consumers.

Manufacturing – Apparel and Accessories

Many apparel and accessory firms rely on overseas factories (particularly in Asia). Tariffs directly increase input or finished‐goods costs, which can compress profit margins. Some names in this category showed particularly sharp underperformance, reflecting immediate investor concern.

Retail – Cyclical

Retailers that import significant merchandise, especially discretionary/cyclical goods, face cost headwinds if tariffs rise. In turn, they may be forced to raise prices or sacrifice margins, both of which spook investors anticipating softer consumer demand.

Retail – Defensive

Defensive retailers (grocery chains, discount stores, for example) still import goods, so direct tariff effects can hit their product costs. While the “defensive” name typically implies they fare better in a downturn, new trade barriers can still disrupt supply chains and compress margins in the near term.

Medical Devices and Instruments

Many device and diagnostics companies rely on specialized imported components or have manufacturing facilities abroad. Even seemingly niche subcomponents can be subject to higher import tariffs, potentially raising production costs or delaying shipments, hence the direct classification.

Industrial Distribution and Industrial Products

Firms in these segments typically move large volumes of parts, equipment, and machinery, much of which is sourced globally. An abrupt jump in tariffs can have a clear and immediate margin impact, which investors quickly price in.

Hardware manufacturers and semiconductor companies often have complex, globally dispersed supply chains. Extra duties on raw materials or intermediate chips can impact costs, while tighter trade restrictions may disrupt demand from overseas customers.

What This Means for Investors

• Heightened volatility for tariff‐sensitive names: A negative CAR around a tariff announcement suggests the market believes these firms face direct earnings headwinds or at least operational disruptions in a more protectionist trade environment.
• However, keep fundamentals in focus: Not all negative short‐term reactions reflect lasting damage. Some companies can shift supply chains or pass through added costs. This basket may contain oversold opportunities if the market has overreacted.
• High uncertainty and lack of moat often mean bigger tariff‐driven moves: Many of the largest negative CARs appeared where companies lack the pricing power and brand resilience to offset abrupt cost hikes, as well as cases where our analysts believe the range of outcomes is rather wide.
• Even wide-moat names aren’t immune: Nike, for example, saw a significant drop, reminding us that brand power can mitigate some margin pressure, but it doesn’t fully insulate a firm from short‐term market fears about supply chain disruption.
• The flip side: To the extent that tariff concerns abate—whether in the case of an individual country or a region—today’s underperformers could quickly reverse course. The more quickly normalization occurs, the less severe the damage.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.