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5 Top-Ranked U.S. Stocks to Gain From Trump's China Tariffs

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On Apr 3, the United States unveiled the list of the Chinese imports which will come under fire from the proposed U.S. tariffs. Chinese products which are utilized in high-tech sectors like industrial robots, information technology, communication technology, aerospace and medicine will bear the brunt of the tariffs.

Notably, intellectual property theft by Chinese companies in the guise of producing goods for the American tech giants is the rationale behind Trump administration’s imposition of these tariffs. Safeguarding of the highly valuable patents of the American tech heavy companies from China is of foremost importance to the United States.

Further, this move highlights the Trump administration’s aggressive efforts to shield next-generation innovative products of these high-tech industries of the country. Consequently, investment in some of these stocks with a favorable Zacks Rank should prove to be lucrative at the moment.

National Security Concerns Leads to Imposition of Tariffs

The U.S. government imposed 25% tariffs targeting 1,300 Chinese imports for a total worth of $50 billion. However, these tariffs will not be effective immediately. Domestic companies and consumers can lobby to delete or add products in the list by May 11. A public hearing on the issue will take place on May 15.

Trump administration is deeply concerned about China’s drive to unseat United States as the primary developer and supplier of state-of-the-art products in the fields of high-tech artificial intelligence, semiconductors, quantum computing and various other digital technology driven sectors.

Notably, most of the big manufacturers of these products are fully patronized by the Chinese government. These companies have become serious threat to the U.S. economic and military supremacy.  Incidentally, China runs a massive $375 billion trade surplus against United States.

Sectors to Gain

U.S. companies that rely on Chinese imports are unhappy about the move as it will raise prices of high-tech equipment and several electronics products for the IT sector. However, a hike in product prices will certainly help U.S. manufacturers engaged in producing goods on which tariffs will be levied.

Companies producing industrial robots, communication satellites, aviation and a slew of semiconductors will be the major beneficiaries. Additionally, producers of wireless equipment, medicine and intermediate goods like machinery and chemicals will also gain from the move.

Our Choice

Trump has given strong signals that his administration will take special interest in the functioning of the tech-savvy sectors. At this stage, investors will be better off investing in U.S. manufacturing companies, which are expected to benefit the most from upcoming U.S. tariffs on China. Hence it has imposed tariffs on high technology China companies in order to protect the national interest.

We have narrowed down our search to the following stocks with Zacks Rank #1 (Strong Buy) and a strong growth potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our five picks year to date.

Comtech Telecommunications Corp. (CMTL - Free Report) designs, develops, produces and markets innovative products, systems and services for advanced communications solutions.

Comtech has expected earnings growth of 232.4% for current year. The Zacks Consensus Estimate for the current year has improved by 156.8% over the last 60 days.

Curtiss-Wright Corp. CW provides high-tech, critical-function products, systems and services to the commercial, industrial, defense and power markets.

Curtiss-Wright has expected earnings growth of 15.1% for the current year. The Zacks Consensus Estimate for the current year has improved 8% over the last 30 days.

Stepan Co. SCL is a major manufacturer of specialty and intermediate chemicals used in a broad range of industries.

Stepan has expected earnings growth of 11.2% for current year. The Zacks Consensus Estimate for the current year has improved by 8.2% over the last 60 days.

Mellanox Technologies Ltd. MLNX is a leading supplier of semiconductor-based interconnects products to world-class server, storage, and infrastructure OEMs.

Mellanox has expected earnings growth of 60.5% for current year. The Zacks Consensus Estimate for the current year has improved by 15.5% over the last 60 days.

Cabot Corp. CBT is a leading global specialty chemicals and performance materials company. It delivers a broad range of products and solutions to customers globally.

Cabot has expected earnings growth of 18.4% for current year. The Zacks Consensus Estimate for the current year has improved by 6.6% over the last 60 days.

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