Volatility is nothing new for global markets. Investors have long learned to navigate cycles of boom and bust, inflation and disinflation, optimism and fear.
But trade policy — and tariffs in particular — introduces a different kind of risk. It is unpredictable, political, and often enacted suddenly, with little warning for businesses that rely on cross-border supply chains or global customer bases.
This unpredictability has become a recurring feature of the investment landscape in recent times. Tariffs are no longer just economic tools; they are instruments of geopolitical strategy, used by governments to protect industries or assert leverage in negotiations.
For businesses, that means disruption can arrive not from consumer demand or technological change, but from a policy decision made overnight.
For investors, the question is not whether to anticipate every headline, but how to identify the companies that can endure and adapt regardless of policy swings.
Companies with pricing power, flexible supply chains, and strong industry dynamics are not merely weathering this turbulence — they are using it to strengthen their competitive edge. These qualities are what define resilience, and resilience is what ultimately underpins long-term investment success.
Pricing power: Passing costs to customers
Pricing power is the most direct defence against tariffs. Companies with the ability to pass higher costs onto customers protect their profitability and market share. This advantage typically comes from products deemed essential, strong brand loyalty, or contractual structures that guarantee cost recovery.
Consider the HVAC industry. Heating and cooling systems are indispensable, and when they break down, they are replaced. Carrier Global, a leader in the sector, benefits from this reliable replacement cycle. Even in a tariff environment, such businesses can raise prices without losing demand.
Brand loyalty offers another buffer. Apple’s customer base is famously less price-sensitive, giving it more leeway than rivals to absorb tariff-driven price hikes. Luxury brand groups such as Hermès also illustrate the strength of brand equity, with their long wait lists and ability to raise prices with little pushback.
Defense contractors, meanwhile, often operate under “cost-plus” contracts, where governments reimburse rising expenses. Even in fixed-price contracts, renegotiations allow adjustments over time. With defense considered strategically essential, demand remains steady despite shifting costs.
And in supply-constrained markets, pricing power strengthens further. Semiconductor leaders like NVIDIA and Broadcom, producing critical AI chips in tight supply environments, can raise prices to offset tariffs with minimal risk to demand.
Cost absorption: Shielding customers
For other businesses, protecting customers from higher costs may be the smarter strategy. Absorbing tariffs can defend market share and customer loyalty, especially if the disruption is temporary. This approach is most sustainable for companies with strong margins or broad scale.
Companies that operate in the medical device, biotech and pharmaceutical sectors are prominent in this respect, with high-margin models meaning they are well positioned to shoulder cost pressures.
Even in thinner-margin sectors, some companies choose cost absorption as a competitive tactic. For example, Chipotle has pledged not to pass tariffs on Mexican avocados to consumers, prioritising affordability and demand continuity over short-term margins. Walmart and Costco adopt similar strategies, defending their value-driven positioning by weathering temporary shocks themselves.
Supply chain adjustment: Rewiring for resilience
The most adaptable companies are those that can rewire supply chains to reduce exposure to tariffed goods. This often means shifting sourcing to alternative markets, investing in domestic capacity, or building “local-to-local” models where production occurs near the point of consumption.
During the recent US – China trade negotiations, many multinationals diversified production into Southeast Asia and Mexico. Those with global scale and multi-local strategies, such as Siemens, Carrier Global, and Schneider Electric, were able to pivot efficiently. By producing closer to customers, they reduced tariff exposure while retaining global reach.
Companies like Tesla highlight another path: vertical integration. By controlling more of its production process — from batteries to final assembly — and operating gigafactories in both Europe and China, the company reduces reliance on any single market. Its Shanghai plant sources 95% of components locally, insulating it from reciprocal tariff risks.
Industry dynamics: Sector matters
Resilience also varies across industries. Industrials, which typically import low-margin components but add significant value domestically, are less exposed to tariffs than industries heavily dependent on cross-border finished goods. Bulky, high-value products are often produced closer to their markets, limiting tariff sensitivity.
Automakers, by contrast, face greater exposure. Following the imposition of 25% tariffs on imported vehicles and parts, several European and Asian firms temporarily halted U.S. shipments. Shifting production is possible, but duplicating supply chains is costly and time-intensive.
Resilient companies within vulnerable industries are often distinguished by differentiated strategies. Tesla again provides an example: its combination of vertical integration and geographic diversification helps it navigate a sector otherwise highly sensitive to trade shocks.
Lessons for investors
What seems to be increasingly apparent is that tariffs may come and go, but uncertainty is here to stay. Trade policy has evolved into a geopolitical lever, meaning sudden shifts are part of the business environment for the foreseeable future.
For investors, the most effective response is not to react to each headline but to focus on the deeper qualities that allow companies to withstand disruption. Businesses that can defend margins, adjust supply chains, and retain customer loyalty are better placed to compound value over time.
Ultimately, investing is still about patience and perspective. Short-term tariff risks may unsettle markets, but they also reveal the businesses truly built for the long haul.
For those investors focused on building enduring wealth, the lesson is clear: resilience is not just a defensive posture — it is the cornerstone of long-term investing.
Matt Reynolds is an Investment Director for Capital Group Australia, a sponsor of Firstlinks. This article contains general information only and does not consider the circumstances of any investor. Please seek financial advice before acting on any investment as market circumstances can change.
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