Measuring the Impact of Tariffs on Equity Performance

April 29, 2025 | Thomas Neuhardt, Associate Research Analyst

This week’s chart shows two indices created by Morgan Stanley that seek to track the performance of companies with different relationships to the global trade landscape. The first index, called “Tariff Exposed,” represents a group of stocks that are more negatively impacted by tariffs due to supply chains and revenue streams that are global in nature. The second, dubbed “Tariff Insulated,” tracks a basket of firms that are insulated from recent tariffs (or have mitigation strategies related to tariffs in place) due to the nature of their operations. The two indices are global, sector-neutral relative to each other, and include names across the Consumer Cyclical, Consumer Defensive, Industrials, Technology, Health Care, and Basic Materials spaces. Some of the largest constituents of the Tariff Exposed basket are Target, Deere & Co., Dell Technologies, and Intuitive Surgical. Tariffs have served as a headwind for these businesses thanks to their heavy dependence on imports (Target and Dell Technologies) and reliance on export markets (Deere & Co. and Intuitive Surgical). On the other hand, some of the largest constituents of the Tariff Insulated basket are Ulta Beauty, Levi Strauss, Domino’s Pizza, and McDonald’s. These companies have been less impacted by new trade restrictions thanks to localized sourcing of ingredients (Domino’s Pizza and McDonald’s) and diversified supplier bases (Ulta Beauty and Levi Strauss).

Since the start of 2025, the Tariff Exposed and Tariff Insulated indices have returned roughly -14.1% and -0.8%, respectively, as of this writing. Going forward, it is imperative that investors remain diversified across their equity portfolios to ensure exposure to those companies that can weather the tariff-induced storm and those that may be poised to bounce back as trade negotiations progress.

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