Some Surprising Winners From the Trade War

The stock market has been on a tear as of late. We’ve just witnessed an amazing V-shaped recovery off of the “Liberation Day” lows.

And yet, I pose the question…

Has anything changed?

The S&P 500 fell by nearly 15% in just a matter of days after President Trump announced his “reciprocal” tariffs on the rest of the world.

I emphasize “reciprocal” here because it turns out that the formula used to determine the “tariffs” that the rest of the world was charging the U.S. wasn’t centered around tariffs at all.

Instead, Trump’s qualms had to do with unbalanced trade.

Here’s the formula used to calculate the recent tariffs:

This looks complicated at first glance, but it isn’t.

The “ί” symbols don’t impact the calculation and “ε * φ” is defined as 1.

All this formula means is that the change in the rate of tariff (Δτ) is equal to a country’s total exports to the U.S. (Χ) minus a country’s total imports from the U.S. (Μ) divided by that country’s total imports to the U.S. (M).

In other words, this formula represents each country’s trade imbalance with the United States.

Like I said before… Liberation Day was never about tariffs, it was about trade.

A week after unprecedented levels of tariffs were levied on the rest of the world, the U.S. paused them, opening up a negotiating period. This is what caused the market to rally back above its pre-tariff levels.

Since Liberation Day, U.S. trade representatives have touted President Trump as the best dealmaker that the world has ever seen and they’re talking about the extensive negotiations going on behind the scenes.

But here’s the problem…

As I write this, there has only been one trade deal officially announced (with the United Kingdom). While the pause with China got plenty of attention, it was precisely that – just a pause.

Unless we see a flurry of announcements of new deals in the coming weeks, we’re going to be right back where we started when that 90-day negotiating period was announced on April 9.

Who knows? Maybe that will happen. In recent days, U.S. Treasury Secretary Scott Bessent and U.S. Secretary of Commerce Howard Lutnick have been in the news saying that the “reciprocal” tariffs will go back into place for countries that don’t negotiate in good faith.

To me, that sounds like a pressure campaign to the rest of the world to get deals done.

The Trump administration already saw how the stock and bond markets reacted to their tariff plans once, and I doubt they want to see the markets give back their recent gains.

I’m not here to debate whether or not Trump’s focus on trade imbalances is right, smart, or even possible to rectify (the fact of the matter is, the U.S. is the wealthiest country in the world, and, therefore, it makes sense that we’d consume more goods and services from other places than they’d buy from us).

Instead, I want to highlight some potential winners of these ongoing negotiations. If Trump’s true focus is on trade deficits, here are five areas of the market that will be big winners in terms of increasing exports to balance things out.

Natural Gas Players

Natural gas is a relatively cleaner energy source. It emits 50% to 60% less carbon dioxide than coal for the same output of energy. And the United States has the fourth largest natural gas reserve (behind Russia, Iran, and Qatar).

Currently, the U.S. has roughly 700 trillion cubic feet (TcF) of “proven” reserves and around an estimated 3,000 TcF of technically recoverable reserves, which includes both proven and unproven reserves. (Unproven meaning not officially drilled, but expected to be present based upon scientific analysis.)

Proven U.S. reserves tend to increase about 10% per year as energy exploration occurs, making it clear that the United States is (and will continue to be) a global leader in the natural gas space for years (and decades) to come.

Source: U.S. Energy Information Administration

The U.S. uses roughly 32.5 TcF of natural gas annually. Therefore, it’s expected that we have roughly 90 year’s worth of reserves.

Due to the fast pace of innovation in the renewable energy space, it’s highly unlikely that we’ll need 90 year’s worth of fossil fuel. Breakthroughs are happening on an annual basis, which point toward natural gas usage peaking between 2030 and 2040. Things like nuclear fusion are about to usher the world into a new era of seemingly unlimited energy resources. With that in mind, it makes sense for the U.S. to capitalize on present day demand, profitably exporting its reserves while it still can.

Selling domestic gas seems like a perfect way for the U.S. to narrow its trade deficit with trade partners who don’t have energy reserves of their own.

As you can see, natural gas exports have been growing for decades. During Trump’s first term in office, this trend accelerated. I expect for that to be the case during his second term in the Oval Office as well.

Source: U.S. Energy Information Administration

The biggest natural gas producers in the U.S. are Expand Energy (EXE), Coterra Energy (CTRA), Chevron (CVX), Exxon Mobil (XOM), and EQT (EQT).

These companies, along with the pipeline stocks, who often own export terminals at some of the largest ports in the U.S., stand to benefit if the Trump administration convinces other countries to use natural gas purchases to narrow their trade deficits.

You can to see our latest research on the energy sector; we’ve recently added a new stock from the energy sector to our Wide Moat Letter model portfolio.

Nvidia: The King of Artificial Intelligence

There’s a global race playing out right now in the technology sector with companies, institutions, and even nation states all in pursuit of agentic artificial intelligence (“AI”).

Jensen Huang, the CEO of Nvidia, joined Trump on his recent Middle East tour. Huang even set aside his famous leather jacket and donned a business suit.

When Huang puts on a tie, you know things are serious. And it looks like his trip paid off. Nvidia announced partnerships with Saudi Arabia and the United Arab Emirates which should lead to billions in revenue as U.S. companies aid trading partners with their AI ambitions.

Earlier this week Huang expressed public criticism of Biden-era chip export controls. He said that Biden’s AI Diffusion policies not only cost U.S. companies billions in revenue, but likely boosted Chinese AI proficiency. A week ago, Trump announced that he would be rescinding those Biden-era policies, seemingly opening up opportunities for companies like Nvidia to enter new markets.

The cutting-edge semiconductors that Nvidia sells aren’t cheap. Huang has said that it would cost anywhere between $30,000 and $40,000 for a single Blackwell (the company’s latest AI chip iteration), and the Saudis just placed an 18,000-chip order.

There’s no shortage of demand for AI processing power across the world, and a revamped AI Diffusion policy likely makes Nvidia one of the biggest beneficiaries of trade agreements that focus on increasing U.S. exports.

Boeing and John Deere: American Manufacturing Leaders

President Trump’s top priority during his second term appears to be American manufacturing. I think he wants his legacy to be centered around a resurgence of domestic production. Increased manufacturing capabilities in the U.S. should increase prosperity while also addressing critical national security concerns. Right now, there aren’t many companies known for their U.S. factories. But, when it comes to solving trade deficits, the ones that are surely stand to benefit… Which is something we are already starting to see.

During Trump’s Middle East tour, he touted a “landmark order” of $96 billion worth of Boeing wide boat jets from Qatar.

The White House press release said:

This is Boeing’s largest-ever widebody order and largest-ever 787 order. This historic agreement will support 154,000 U.S. jobs annually, totaling over 1 million jobs in the United States during the course of production and delivery of this deal.

Boeing operates as a part of a global duopoly in the aerospace industry (alongside France’s Airbus).

Boeing’s new 737 MAX planes carry an approximate $100 million price tag. Its new 787 wide boat planes cost upwards of $250 million.

While Boeing sources components from international markets, its planes are assembled in the U.S. The company’s total backlog sat at $545 billion last quarter (showing immense global demand for new planes).

President Trump has been actively campaigning for Boeing, and it looks like changing an order from Airbus to Boeing could be an easy way for countries to increase U.S. imports at the negotiating table.

But Boeing is not the only company that will benefit from big-ticket domestic exports.

During its recent second quarter earnings call, Deere’s CEO, John May, highlighted their domestic operations saying:

We’re proud of our storied U.S. history, and with nearly 80% of our U.S. sales and 25% of our international sales built right here in U.S. manufacturing locations. We stand by and continue to embrace our American manufacturing heritage as we deliver value for our customers around the world.

Deere has been investing heavily in autonomy for years and is a leader in the global agriculture industry. There isn’t a lot of competition for this company at the high end of its product range (where new tractors and combines come with seven-figure price tags). The company’s biggest competitor is CNH Industrial (think red New Holland tractors), which is incorporated in the Netherlands.

Everyone needs to eat. Just about every country on Earth has an agricultural output. So, it seems that adding a few high-end John Deere tractors into the mix could be a reasonable way to reduce trade deficits.

Defense Stocks

This week President Trump’s “Golden Dome” domestic defense network has been in the news with a $175 billion price tag and a three-year completion deadline. That’s good news for companies like L3Harris and Northrop Grumman who have missile defense expertise and are expected to play a role in the Golden Dome’s development. But, the U.S. isn’t the only country increasing military spending these days.

India and Pakistan – two nuclear powers – have seen their cold war turn hot in recent weeks.

Ukraine and Russia are still at war and Europe continues to be concerned about ongoing aggression from its Eastern neighbor.

This week headlines broke that Israel may be planning attacks on Iranian nuclear sites.

And the threat of a Chinese invasion of Taiwan is an ever-present threat in the Far East.

The U.S. has allies in all of these regions who’re dedicating more and more of their gross domestic product towards defense spending, and U.S. defense stocks are expected to be beneficiaries.

Like Nvidia, Boeing, and Deere, defense stocks produce products with hefty price tags, meaning that things like orders of fighter planes or advanced weapons systems can go a long way toward closing trade deficits.

Conclusion

I think it makes sense to be wary of the market’s recent rally. The bond market is certainly less bullish. I’m concerned about a pullback (if we don’t see trade deals soon) as well.

So, now may not be the time to dive headfirst into any of these ideas. But, in the event that we see major deals announced that close trade deficits, I think these five areas of the market are going to be a good place to look for tailwinds.

Best wishes,

Nick Ward
Analyst, Wide Moat Research