Ascension

President-elect Donald Trump wants to buy Greenland. He also wants to rename the Gulf of Mexico as the ‘Gulf of America.’ If you’re an investor in the U.S. stock market though, you’re probably less concerned with those ideas and more interested in the ones he’s already walked back on since we last touched on sectors likely to benefit from Trump 2.0.

Trump’s inauguration ceremony is scheduled for Monday, 20 January, in Washington D.C. He’s assuming office at an interesting time for markets – U.S. Treasury yields are skyrocketing, seemingly oblivious to what the Federal Reserve is doing. The yield on the 10-year note is up 110 points since the Fed began cutting rates.

So, why is this happening? Partly because data continues to tell a story of economic resilience in America. But these rising yields also have to do with an intensifying rhetoric around the impact of tariffs and trade under the new administration: investors are bracing for higher inflation. 

Trump aides reportedly told The Washington Post that the ‘universal’ tariffs he promised would now only be aimed at select sectors: the defence supply chain, critical medical supplies and energy production. But in a Truth Social post shortly after, Trump clarified that his tariff policy ‘would not be pared back’. 

Trump has proposed a 10-20% tariff on imports from all countries, but as much as 60% on imports from China. Remember, U.S. companies’ profit margins are set to take a hit from these higher import costs. That’s everyone from retailers like Walmart ($WMT) (which imports an estimated 70-80% of its merchandise from China) to tech firms like Apple ($AAPL) dependent on Chinese manufacturing. 

The possibility of retaliatory tariffs only adds to the concerns of semiconductor stocks like Nvidia ($NVDA) – which owes 15.4% of its Q3 revenue to China. They’re already reeling from Joe Biden’s parting gift to the new administration: U.S. export restrictions on chipmaking equipment, updated just this week to include advanced AI chips or GPUs.

Even before this update, a tech group that represents firms like Amazon ($AMZN), Microsoft ($MSFT) and Meta ($META) was asking the government to reconsider. They argue that, rather than preserving America’s AI edge over China, the approach announced in December would do the opposite.

We’re already seeing Beijing’s counter measures. China has banned exports of three key mineral commodities critical for the U.S. defence industry. While it's unlikely that Trump will reverse these policies, he might be forced to make strategic alliances to import these minerals – a situation that Aussie miners could make the most of. 

Barclays estimates that S&P 500 earnings could decline 3% if Trump’s tariffs are imposed. For now though, it's a bit of a waiting game, as investors try to read between the lines of the new president’s policies. Keep your eyes on the yield curve, your ear to the ground on trade talks, and get ready to pivot as the Trump 2.0 era unfolds.