President Donald Trump announced that tariffs on Chinese imports would increase up to 145%, citing the need to counteract unfair trade practices and the influx of fentanyl-related materials from China. In response, China declared a retaliatory 125% tariff on U.S. goods, stating that it will not engage further if the U.S. continues unilateral hikes.
The New York Times, Live Updates: U.S. Bond Yields Spike as Tariff Turmoil Spooks Investors
As U.S.-China tariff tensions rise once again in 2025, investors around the world are asking a critical question:
Where should I put my money to protect (or grow) it in the middle of a trade war?
Tariff wars can shake up global supply chains, raise prices, trigger stock market volatility, and shift the balance between winners and losers in the economy. But for savvy investors, volatility also brings opportunity.
Here are 6 smart and practical ways to invest when tariff tensions between the U.S. and China are escalating.
📚 Before exploring how to invest during a trade war, it’s worth understanding how tariffs ripple through the economy. It outlines 7 often overlooked effects that could impact your next investment decision.
Don’t miss this must-read:
1️⃣ Diversify Across Sectors and Geographies
A key principle of smart investing is diversification—but during a trade war, it’s not just smart. It’s essential.
Why?
Tariffs hit certain sectors (like tech and industrials) harder than others (like healthcare or consumer staples). By holding a mix of sectors and international assets, you reduce your exposure to shocks in any one area.
How to apply it:
- Add exposure to international ETFs (excluding China/U.S. if risk-averse)
- Consider defensive sectors like utilities, healthcare, or dividend stocks
- Avoid over-concentration in manufacturing or export-heavy U.S. stocks
2️⃣ Buy Into U.S. Domestic-Focused Companies
Companies that earn most of their revenue inside the United States are generally less affected by global trade tensions.
What to look for:
- Mid-cap and small-cap stocks with minimal international exposure
- Real estate investment trusts (REITs) focused on U.S. properties
- Regional banks and financials serving domestic markets
💡 Tip: Use financial reports to check the percentage of international revenue exposure.
3️⃣ Look for Beneficiaries of Tariffs
Not all companies suffer during trade wars. Some actually benefit from higher tariffs and “Buy American” sentiment.
Examples:
- U.S. steel and aluminum producers (if tariffs protect their pricing power)
- Domestic agriculture tech firms
- Local manufacturing or building supply companies
But remember: these sectors are volatile—invest with caution and short-term awareness.
4️⃣ Increase Allocation to Gold and Commodities
When markets are uncertain, gold and other commodities often shine.
Why?
- Gold is a traditional safe-haven asset
- Commodities like copper and oil may fluctuate based on geopolitical conditions but often rebound with inflation fears
📈 Gold prices tend to rise when global tensions escalate.
Consider:
- Physical gold or gold-backed ETFs (e.g., GLD)
- Commodity-focused ETFs
- Inflation-protected securities like TIPS
5️⃣ Use Dollar-Cost Averaging (DCA)
Trade wars often bring volatility spikes—up one day, down the next. Instead of trying to time the market, use dollar-cost averaging.
How it works: Invest a fixed amount at regular intervals (e.g., weekly/monthly), regardless of the price.
Benefits:
- Smooths out short-term price fluctuations
- Reduces emotional decision-making
- Helps you stay disciplined during volatile periods
6️⃣ Keep Cash on Hand and Stay Flexible
Sometimes the smartest investment is patience.
Why?
- Cash gives you flexibility when opportunities arise
- You don’t have to be fully invested all the time
- It reduces overall portfolio risk during unpredictable events
Bonus Tip: Set aside a portion of your portfolio as “dry powder” to buy during dips.
Strategy Over Emotion
Trade wars aren’t new—but each one brings new twists. The key isn’t to panic but to adapt. By staying diversified, focusing on domestic resilience, and keeping your emotions in check, you can navigate the U.S.-China trade war and come out ahead.
Remember: Uncertainty creates opportunity for disciplined investors.
