From agri to tech: the impact of US tariffs on sectors

This article was written with contributions from Jamie Maddock, Brian Beargie, Charlie Webb, Garland Buchanan and Ken Berlin.

US tariffs are having a significant impact on various sectors, affecting everything from agriculture to technology. Below, we summarise how tariffs are influencing different industries.

Agriculture: US agricultural exports face heightened uncertainty amid the trade tensions. While the impact is not yet clear, the current tariff situation raises uncertainty for US farmers in terms of China’s demand for agricultural products (should China use this as a form of retaliation). The implications would be lower agriculture product prices in North America placing increased pressure on farmers and the whole Agriculture value chain.

Autos: There is a 25% import tax on cars, as well as engines, transmissions and other key car parts. US and European original equipment manufacturers (OEMs) are absorbing most tariff costs, rather than passing them onto consumers, with modest impacts on pricing and margins so far. General Motors* and Ford* provided quantified tariff headwinds but are mitigating these through cost cuts and supply chain adjustments. European OEMs see manageable margin impacts of 100-150 basis points (bps) and seem reluctant to make strategic changes, whereas Japanese OEMs are increasing exports to the US, despite tariffs. Suppliers have universally said that they expect fully to pass through tariff costs, and OEMs have mostly accepted this. As such, we see suppliers and US-based OEMs as best positioned to navigate the current environment.

Chemicals: Tariffs are causing considerable challenges for the chemicals sector, with companies like Eastman Chemical*, Dow Inc.*, and LyondellBasell Industries* reporting profit warnings linked to reduced exports and underused assets. Traditional chemical producers are seeing sharp export declines and margin compression due to tariffs and weak overseas demand. In response, companies are realigning supply chains, adjusting production strategies, and selectively increasing prices. The US-China trade decoupling is fundamentally raising long-term costs and undermining the industry's export-driven model.

Consumer staples: Tariffs are intensifying cost pressures across the consumer sector, disproportionately affecting lower- and middle-income consumers. While absolute spending remains stable, purchasing behaviour has shifted towards value-seeking and smaller basket sizes. Companies are attempting to mitigate tariff-related costs through productivity gains, supplier diversification, and selective pricing strategies. However, the sector faces a potential margin reset as firms compete for share in a subdued volume environment, with some absorbing costs to maintain competitiveness and others risking a double hit of rising input costs and declining volumes.

Copper: Tariffs shifted from raw materials to a 50% levy on semi-finished and finished goods, with minimal impact due to the small volume affected. Domestic support measures currently exist, but companies appear hesitant to invest due to uncertainty around tariff permanence.

Energy: In general, energy companies have low direct tariff exposure. Major international oilfield service companies (e.g., Halliburton*, Baker Hughes* and Schlumberger*) have an estimated $100-150 million EBITDA exposure, which is not material to credit quality, in our opinion. Midstream companies have some exposure to steel costs for new pipelines, but most have procured steel for large projects. Arguably the increased construction expense makes existing midstream infrastructure that much more valuable. Canadian crude producers face a 10% tariff currently, which can impact companies like Canadian Natural Resources*, but is unlikely to result in credit rating downgrades.

Healthcare: US pharma companies are emphasising US-based manufacturing and lobbying for favourable treatment. The tariff exposure for these companies is uncertain pending a delayed Section 232 report. Our expectation is that tariffs will be manageable for branded pharma companies given their strong gross margin profiles (70-80%) but that tariffs may be used as a negotiating tool to extract lower drug prices or push for higher US-based investment (or both). Tariff impacts on generic pharma companies (with lower margins) would likely require years and subsidies to shift US manufacturing. Without support, drug shortages could arise, as generics supply most prescriptions. Thus, any tariff effects on this segment should remain manageable under realistic policy timelines and with necessary incentives.

Medtech and life sciences: Manageable impacts of around 2-5% of earnings before interest, taxes, depreciation and amortisation (EBITDA), with most pressure from US exports to China. Most US- and European-based companies are facing greater tariff burdens from exports to China than from imports into the US. These companies are managing their supply chains or absorbing higher costs (or both) with resulting modest pressures on earnings.

Retail: Companies like Home Depot* and Lowe’s* are spreading tariff-driven cost increases across products to avoid sharp price hikes in specific categories. Inventory was front-loaded in the first half of the year, so we anticipate cost impacts will become more visible in the second half.

Steel: The US implemented a 50% tariff on steel imports to the US for the majority of countries. This has benefitted domestic supply, utilisation and profitability for US producers like Nucor* and Steel Dynamics*. Despite higher prices, there is ample domestic capacity, and the main beneficiaries are US producers. UK steel currently faces a 25% tariff, following a trade deal between the two countries in May 2025.

Technology, media and telecom: Direct tariff impacts are muted. Semiconductor and hardware companies could be affected, but current exemptions limit exposure. Apple* and Applied Materials* reported headline tariff impacts but are mitigating through US investments and supply chain adjustments.

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an L&G portfolio. The above information does not constitute a recommendation to buy or sell any security.