Beyond the Headlines: Winners and Losers in a Tariffed World
Samuel Ziff
Partner | Portfolio ManagerSam Ziff joined OP in April 2013. He was previously employed by J.P. Morgan Cazenove working in the UK Industrials Corporate Finance team for a total of 4 years. He graduated from Oxford University. He is CIO, manages the global equity portfolios, and contributes to the overall investment selection.
Tariffs and industrial policy are not simply political theatre, they are reshaping cost structures, pricing power and capacity utilisation across industries. For investors looking beyond the headlines, this shift is creating opportunity in companies long disadvantaged by decades of globalisation. We may be entering another period of structural change.
History moves in phases: long stretches of stability punctuated by rapid reorganisation. The fall of the Berlin Wall and China’s accession to the WTO integrated more than a billion workers into the global system and reoriented supply chains around efficiency and cost minimisation.
That era is now fragmenting. Since the Global Financial Crisis, the Fukushima earthquake and more visibly Russia’s invasion of Ukraine, governments and companies have been reassessing the balance between efficiency and resilience, with resilience replacing cost minimisation in some sectors.
Financial historian Russell Napier describes this shift as a move toward “National Capitalism”. This describes a system shaped less by liberalised trade and more by national interest and industrial policy. Tariffs are among its most visible tools.
The Investment Implication
Tariffs are often framed in macroeconomic terms, but their microeconomic effects often matter more. They reshape cost curves, influence pricing power and redirect capacity. Consumers may absorb some costs and importers may see pressure on margins. Domestic producers, however, can benefit through higher utilisation, stronger pricing discipline or volume shifts.
The key question as we see it, is not whether tariffs are “good” or “bad” for growth, but who benefits? Below we outline three areas where this shift is beginning to matter.
Case Studies: Where the Rubber Hits the Road
Lear: Taking Share in the Face of Adversity
Following the announcement of increased tariffs last April, the first response for many investors was to worry about the negative consequences. Lear, the US headquartered auto supplier, initially faced around $200m of costs related to imports from Central America. However, higher prices have enabled Lear to recover most of this impact, with the higher costs ultimately being borne by customers.
An important consequence has been the shift of production capacity by auto manufacturers to the United States. Suppliers with established domestic footprints may therefore see volume benefits.
Roughly 7.7 million vehicles were imported into the US market in 2024. Industry estimates suggest existing domestic spare capacity of approximately 2 million units. If even half of this capacity were utilised through reshoring Lear could see a benefit of roughly $1bn in extra sales and profitability rising by one third. The shares are currently valued at under 10 times price to earnings, a valuation that heavily understates any prospect of growth.
ArcelorMittal: Pricing Power
Steel markets have been an example of how tariffs work in practice. Faced with the threat of heavily subsidised cheap Chinese steel, the US first placed a 25% tariff on steel imports in 2018. Europe has been slower to respond.
The first step was the implementation of the Carbon Border Adjustment Mechanism (CBAM) on 1st January, which aims to equalise carbon costs between domestic and imported production. Initial estimates put the impact at c. $100 per tonne of steel. An additional step is the quota and tariff system designed to bring back 10 million tonnes of production to Europe, about 10% of current production.
ArcelorMittal, as a European based steel manufacturer, will benefit materially. Furthermore, its operations in Canada, Brazil and India are now likely to face support from governments. Import tariffs directly alter industry pricing power. The total benefit could be a doubling of Arcelor’s 2025 net profits of $3bn putting the shares on a single digit multiple of earnings.
European Chemicals: The Next Opportunity
The European chemicals industry is in a particularly challenging operating environment. Distributors such as Brenntag and manufacturers such as Evonik point to limited improvement in the near term, as weak end-market demand, sustained capacity expansion in China, and structural cost disadvantages weigh on profitability.
The future could be brighter. A cyclical recovery in key end markets, notably construction and automotive production, looks likely. In addition, governments are increasingly looking at the chemical industry within a “National Capitalism” context.
Valuations reflect low expectations.
Exciting Valuations in Unexciting Industries
Autos, steel and chemicals remain critically important industries. Markets are unexcited by these businesses, but we are excited by their valuations.
At OP we do not make investments based on macroeconomic predictions. We invest with valuation discipline in companies that are out of favour. Sometimes value itself acts as the catalyst; at other times structural shifts change market perception.
Tariffs and industrial policy may represent one such shift. They have the potential to improve industry dynamics for businesses disadvantaged by decades of globalisation. It would be rash to assume that the policy environment shaping the past thirty years will define the next thirty.
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