The recent US-China trade truce, announced on 12 May 2025, marks a significant shift in global trade dynamics. With tariffs reduced from their peak levels—145% for the U.S. and 125% for China—to 30% and 10% respectively, industries that were previously hindered by cross-border levies are now poised for recovery.
Manufacturing: A sector set free
The immediate beneficiary of the tariff reductions is the manufacturing sector. Industries such as automotive, heavy machinery, and consumer goods are experiencing reduced costs due to the easing of tariffs on components and finished goods. The retained 10% baseline tariff remains manageable for firms that can pass costs to consumers or negotiate pricing flexibility.
Key Players:
- Automotive Sector: Companies like General Motors (GM) and Toyota Motor (TM) stand to benefit from reduced tariffs on steel, aluminium, and auto parts, unlocking margins and enhancing competitiveness.
- Heavy Machinery: Firms such as Caterpillar (CAT) and Deere & Co. (DE) gain cost efficiency as tariffs on raw materials like steel and rare earth metals ease, potentially reducing production costs and increasing profitability.
Read Also: Supply chain resilience: Lessons from recent geopolitical flashpoints
Technology: A new era of innovation
The technology sector, which bore the brunt of retaliatory tariffs on semiconductors, consumer electronics, and cloud infrastructure, now sees a growth path. Lower tariffs reduce the cost of manufacturing in China for U.S. firms, while easing restrictions on data flows and joint ventures could spur collaboration.
Strategic Bets:
- Semiconductors: Companies like NVIDIA (NVDA) and Taiwan Semiconductor Manufacturing (TSM) benefit as supply chains normalise, potentially leading to increased production capacity and innovation in chip technology.
- Consumer Tech: Firms such as Apple (AAPL) and Dell (DELL) gain margin relief on devices assembled in China, which could result in more competitive pricing and expanded market reach.
Supply chain winners: Logistics and diversification
The truce’s de-escalation creates opportunities for logistics firms and companies that have diversified their supply chains to mitigate past tariff risks.
- Logistics Giants: Companies like Maersk (MAERSK-B) and C.H. Robinson (CHRW) stand to gain from increased cargo volumes as businesses restock in anticipation of normalised trade, potentially leading to improved revenue streams.
- Diversified Manufacturers: Firms such as 3M (MMM) and Honeywell (HON), which source materials globally, benefit from reduced costs, enhancing their competitiveness in the global market.
Key industry risks:
While the truce is a net positive, several risks remain:
- Geopolitical Volatility: Ongoing tensions in regions like Iran and Ukraine could reignite trade disputes, potentially leading to a re-escalation of tariffs.
- Bullwhip Effect: A surge in cargo shipments as businesses restock could overwhelm ports, raising short-term costs and causing supply chain disruptions.
- Economic Headwinds: Factors such as Federal Reserve rate hikes and inflationary pressures may cap growth in the technology sector, affecting profitability and investment returns.
ETFs to watch
For investors looking to capitalise on these developments, consider the following exchange-traded funds (ETFs):
- Industrial Sector: The Industrial Select Sector SPDR Fund (XLI) offers exposure to manufacturing and logistics companies poised to benefit from tariff reductions.
- Technology Sector: The Technology Select Sector SPDR Fund (XLK) provides broad tech exposure, including companies that stand to gain from eased trade tensions.
- Chinese Equities: The iShares MSCI China ETF (MCHI) aligns with recommendations for increased investment in Chinese equities, particularly in sectors like consumer discretionary and industrials.
Act now—but stay vigilant
The US-China trade truce has reset the stage for global markets, with manufacturing and tech sectors leading the charge.
While risks like geopolitical tensions and economic uncertainties persist, the near-term upside for tariff-sensitive industries is compelling. Investors should prioritise quality stocks with strong fundamentals and diversified supply chains.
Allocating 5-7% of your portfolio to industrial and tech ETFs, with a tactical tilt toward China-focused equities, may be a prudent strategy.
However, it is crucial to monitor geopolitical developments closely, as this truce is fragile, and the next 90 days will be critical in determining the future trajectory of global trade.
Cejay is a Content Producer for Supply Chain Channel, Australia's learning ecosystem created to fill the need for information, networking, case studies and empowerment for everyone in the supply chain sector.
