Best Stocks if Tariffs Rise and Jobs Weaken: 2025 Guide

The big myth: tariffs + weak jobs crush everything (they don’t)

Here’s the thing I wish someone had told me the first time tariff headlines smacked futures at 6:00 a.m.: equities don’t move as a monolith. They shuffle the deck. When tariffs rise and the labor market cools, the market doesn’t dump everything; it reprices cash flows. Some models hold up, some crack. Pricing power and where revenues come from matter a lot more than the scary chyron at the bottom of your screen. And yeah, I’ve learned that one the hard way, owning a low-margin importer during the 2018 rounds felt like carrying a wet piano up a fire escape.

What you’ll get here: a quick, practical map for best-stocks-if-tariffs-rise-and-jobs-weaken thinking. Not a magic list, a playbook. We’ll highlight who tends to keep margins when goods get pricier and hiring slows, and who tends to cough up basis points. The market sorts winners and losers; your edge is knowing which cash flows are stickier than the headlines and which are not.

Two reminders upfront:

• Downturns hit unevenly. Companies with genuine pricing power (high gross margin + low direct import exposure) and a heavier domestic revenue mix usually defend earnings better than the tape implies. The same story, said a touch differently: revenue quality beats narrative quality.
• Tariffs create relative winners and losers. Import competitors with domestic capacity and decent balance sheets often gain share. Import‑dependent, low‑margin assemblers and retailers eat cost inflation, sometimes twice.

We’ve seen versions of this movie. In the 2018-2019 tariff rounds, the U.S. average tariff rate on affected Chinese goods jumped from low single digits to roughly the low‑20s by late 2019, covering about $360B of imports (USTR/Trade data). And yet the S&P 500 posted a total return of about 31% in 2019 (S&P Dow Jones Indices), even as aggregate S&P EPS was roughly flat to slightly negative depending on the series. Translation: the index re-rated the durable cash flows while discounting the fragile ones.

Data points to anchor you: the PPI for steel mill products spiked about 18% year over year at the 2018 peak (BLS). Job openings fell by roughly 4 million from the 2022 high to late 2024 (BLS JOLTS), signaling a cooler labor backdrop without an outright collapse.

Past softening labor cycles tell a similar story. During the 2015-2016 mini‑industrial recession, domestic, asset‑light software and resilient staples outperformed cyclicals tied to global capex, even with ISM Manufacturing wobbling below 50. It wasn’t pretty, but it was selective. It’s always selective.

Why start here in Q3 2025? Because tariff chatter is back this year and payroll growth has been slowing from the post‑pandemic pace (not crashing, but slowing ) and the market is again separating cash flows that can pass through cost and cash flows that can’t. That’s the assignment: figure out who can raise price without losing the customer, who can swap suppliers without losing margin, and who has a domestic mix that blunts the shock. Get those three roughly right (even around 7% right ) and you’re way ahead of trading the headline.

In the sections ahead, we’ll use the 2018-2019 tariff playbook and prior soft‑labor tapes to build a simple screen: pricing power first, import elasticity second, domestic revenue third. Same idea, slightly different lens: focus on the cash flows that the tape pays up for when goods get pricier and hiring slows.

What actually moves P&Ls when tariffs rise and hiring cools in 2025

Mechanically, this year looks like a remix of 2018-2019 with a softer labor tape laid on top. Tariffs push up landed costs on goods. Companies try to pass those costs through. Some can, some can’t, and that gap is the equity story. On the macro side, a cooler job market tends to bleed into lower bond yields over time, which lifts the value of long-dated cash flows. But if tariff-driven goods inflation sticks for a bit, it can keep the front end nervous. So you get this push-pull: cost-up on goods, discount-rate-down on duration. Sounds messy, and it is, but the P&L math is actually pretty plain.

We have a decent playbook. In the last tariff cycle, the Peterson Institute for International Economics (PIIE) showed the U.S. trade-weighted average tariff rate rose from roughly 1.5% in 2017 to around 4.2% by 2019. And the pass-through wasn’t theoretical. Research in 2019 (Amiti, Redding & Weinstein; Cavallo et al.) found high, often near-complete, pass-through from tariffs into U.S. prices paid by importers/consumers. Translation: when tariffs go up, your COGS goes up, and unless you’ve got pricing power or a domestic supply chain, your gross margin goes the wrong way. I’ve watched too many margin bridges where the “tariff bucket” looked small on paper and then quietly ate the quarter.

Now layer the labor market. The BLS JOLTS series shows job openings peaked near 12 million in 2022. Since then, openings have trended lower, no crisis language here, landing in the 8-9 million range this summer. Slower hiring usually cools wage pressure and, historically, sets up easier policy later. That’s bond-friendly. When the back of the curve eases, long-duration cash flows get a valuation boost. Simple present value math: lower discount rate, higher multiple. I’m over-explaining, but that’s the spine of it.

The catch is timing. If tariffs nudge goods inflation up for a few quarters, you can get stickier headline prints, which slows the pace of easing and dulls some of that duration tailwind. Net effect in this mix tends to favor quality balance sheets, clean use, steady free cash flow, and real pricing power. Also, firms with domestic supply chains or short, flexible import exposure usually sidestep the worst COGS surprises.

Currency is the other underappreciated lever. In 2018, the U.S. dollar strengthened (the DXY rose mid-single digits that year), and tariff episodes can coincide with a bid for the dollar. Stronger USD = tougher translation for multinationals’ foreign earnings. A 5% dollar move doesn’t line up one-for-one with EPS, but it can shave a point or two off reported growth if your non-USD mix is big and unhedged. I’ve seen CFOs try to shrug this off, until they walk through the regional P&L and realize EMEA’s growth was fine in local currency but down in dollars.

So, what actually moves P&Ls here?

• COGS inflation from tariffs: Highest for import-reliant categories with low substitution. 2019 studies showed high pass-through; assume your vendors will try to push costs to you, and you to the customer.
• Volume elasticity: If you raise price, do you keep the customer? The market pays up for brands with around 7% price power without unit loss.
• Labor and rates channel: Cooler openings and slower hiring point to easier policy later this year, which helps duration. But a tariff bump can offset near term.
• FX translation: A firmer USD, like 2018, pressures reported international revenue and EPS for multinationals; domestically skewed names dodge it.

Rule-of-thumb: steady free cash flow + domestic sourcing + real pricing power beats a hot growth story with fragile gross margins when tariffs and hiring are moving in opposite directions.

In short, 2025’s blend rewards the boring-but-bankable: stable cash generators, balance sheets that don’t flinch, and supply chains that keep the tariff tax from leaking straight into the P&L. Not flashy. Just effective.

Defensive earners that usually keep the lights on

When volumes wobble and input costs creep, you want business models that don’t panic. I’m not trying to be clever here, just practical. The playbook in 2025 isn’t new, it’s proven.

• Consumer Staples with brand pricing power (household, beverages, tobacco): Big brands pushed high single-digit price in 2022-2023 and kept most customers, which is the whole ballgame. Elasticities stayed shallow, especially in tobacco where long-run demand elasticity typically sits around -0.3 to -0.4 in academic studies. By 2024, price mix cooled but didn’t roll over, and in 2025 we’re still seeing mid-single-digit pricing stick in many categories while volumes gradually mend. Translation: they pass through costs quicker than the market expects and defend gross margin. My personal tell? I grabbed a well-known laundry detergent earlier this year and realized the bottle was a tad smaller, price held, margin protected. Not pretty, but effective.
• Regulated Utilities with decoupling and fuel recovery: These are designed to true-up. Fuel and purchased power riders allow recovery over time, and states with revenue decoupling blunt volume swings. Allowed ROEs in rate cases have clustered near the high-9s, call it ~9.5%-10% across 2023-2024 public decisions, and that anchor doesn’t vanish in a soft patch. The sector’s dividend yield sits roughly 3.7%-4.1% as of Q3 2025, and if rates ebb later this year, duration finally helps instead of hurts.
• Healthcare services and managed care: Premiums are recurring, utilization is less cyclical than retail demand, and MLRs (medical loss ratios) tend to live in the mid-to-high 80s. Yes, Medicaid redeterminations were a headache in 2023-2024, but enrollment mix and pricing resets improved through 2025. Healthcare spend remains a massive base, north of 17% of U.S. GDP in 2022 per CMS, so the cash flows don’t swing wildly with payroll headlines.
• Telecoms with sticky postpaid subs: Cash flow visibility beats growth sizzle here. Postpaid phone churn has sat under 1% for the big carriers in 2023-2025, about as sticky as it gets outside your utility bill. ARPU nudges up via premium plans and bundling; capex peaked with 5G build-outs and is normalizing, which supports free cash flow even if top-line is, well, meh. The yields don’t hurt while you wait.
• Discount retailers and club stores: In softer labor markets, households trade down. Clubs monetize that behavior with dues, Costco renewal rates ran above 90% worldwide in 2024, with U.S./Canada even higher, creating a dues-first model that cushions margins when baskets get value-focused. Dollar bargains and private label pick up share as shoppers stretch paychecks. It’s simple traffic math.
• Auto parts retailers: The underlying driver is the fleet. The average U.S. vehicle age hit roughly 12.7 years in 2025 (S&P Global Mobility), a fresh record. Older cars need more maintenance, and when job markets soften, people fix rather than replace. These chains historically posted resilient comps in slowdowns because maintenance is a “must-do,” not a “nice-to-have.”

If I sound confident, it’s with humility, macro makes all of us look silly now and then. But the common threads above are hard to argue with: regulated or recurring revenue, pricing that actually sticks, and customer behavior that doesn’t swing 30% because gasoline ticked up. Also worth saying out loud: if tariffs bite while hiring cools, these sectors have more tools, riders, formularies, memberships, private label, to defend margin, not just revenue.

Checklist for the slog: pricing that passes through in quarters (not years), cash returns that don’t depend on perfect GDP, and balance sheets that can absorb a few bad prints without a covenant call.

Tariff beneficiaries: domestic producers and reshoring winners

When import costs go up, the math gets simple, domestic capacity with scale and cost discipline can take price and keep share, if demand doesn’t roll over. Not hero numbers, just steady blocking and tackling. Two quick datapoints that frame it: the Section 232 tariffs introduced in 2018 kept a 25% duty on most steel and 10% on aluminum in place, and the May 2024 update to Section 301 hiked U.S. tariffs on Chinese EVs to 100% and on solar cells/modules to 50% (2024 policy). Those aren’t footnotes; they reset pricing umbrellas that domestic players can stand under.

• Industrials with high U.S. production: Names that source and assemble largely in the U.S., think select electrical equipment, HVAC, and capital goods with domestic plants, pick up a relative price edge when Asian-origin inputs get pricier. It’s not magic; it’s fewer tariffed components in the bill of materials and shorter lead times. If backlogs hold reasonably steady, incremental margin can expand 50-150 bps on mix and price, seen this movie a few times since 2018.
• Specialty materials and building products: Categories that compete with imports (tile, engineered wood, insulation, niche chemicals) can flex price faster. But keep an eye on the cost side, U.S. on-highway diesel hovered around $4/gal this summer (EIA, 2025), and natural gas has been choppy. If energy or freight spikes, that pricing umbrella shrinks a size.
• Steel and aluminum: Import protection helps, no debate. The 25% steel/10% aluminum duties (2018 policy, with various quotas/exemptions) stabilize domestic pricing bands. Still cyclical, though, AISI reported U.S. steel mill capacity utilization averaging around the mid-to-high 70s in 2024, and when that slides, EBTIDA per ton compresses in a hurry. Translation: own it, but size it, this isn’t a sleep-at-night utility.
• Defense primes: Not tariff trades, strictly speaking. But the budget is the ballast. The FY2025 defense topline continues to trend higher, and these contractors have visibility that most Industrials would trade a kidney for. If macro wobbles, backlog and cost-plus contracts cushion earnings, even if titanium or specialty alloys move around.
• Logistics and nearshored supply chains: Regional manufacturers with Mexico/U.S. inputs gain as Asia-origin costs rise. Mexico became America’s top goods trading partner in 2023 at roughly $798B in two-way trade (U.S. Census, 2023), and that nearshoring flow, parts to Laredo, finish in Texas, reduces tariff leakage and cycle time. Truckload and cross-border brokerage with dense networks in TX/AZ see better pricing power when ocean alternatives aren’t as cheap.

One small detour, because it matters: companies with domestic capacity and disciplined SG&A usually monetize tariff windows best. Everyone talks price, but the winners keep overtime in check, run longer campaigns, and negotiate energy. It sounds boring, yea, but that’s where 100-200 bps shows up.

Positioning note: lean into domestic share-takers and nearshored networks; treat metals as cyclical exposure; and haircut stories that need perfect freight and energy to pencil.

Factor tilts that do the heavy lifting

Here’s where we translate themes into screens you can actually run on a Sunday night without needing five PhDs. In a tariffs-up, jobs-down tape, I keep it simple: favor Quality and Low Volatility. Historically, both have held up better in slow-growth and tightening-financial-conditions regimes (and no, that’s not me guessing, just 20 years of watching who survives when revenue growth decelerates and credit gets picky). When policy shocks hit, like the 2018-2019 U.S.-China tariff rounds, where the U.S. applied up to 25% tariffs on roughly $250B of imports (USTR notices, 2018-2019), the names with clean balance sheets and stable margins didn’t need hero-ball guidance. They just executed.

Your working screen (you can tweak the dials):

• Domestic revenue ≥60%. You want U.S.-centric earners. Higher USD sensitivity tends to ding multinationals when the dollar firms and foreign demand wobbles. Remember, Mexico was the U.S.’s top goods trading partner in 2023 at about $798B of two-way trade (U.S. Census, 2023); the winners in that nearshored flow book revenue here, not half in Europe at 1.04x FX.
• Gross margin stability. Look for low standard deviation of quarterly gross margin over the past 12-16 quarters. And specifically, check 2018-2019 as a real-world pass-through test. If margins held or expanded through those tariff waves, that’s your green flag on pricing power and sourcing agility.
• Balance sheet quality: net cash or low net debt/EBITDA (sub-1.5x for most sectors), and interest coverage >6x. If payrolls soften and top-line slows, coupons still get paid. Keep it boring; boring pays.
• Low Volatility overlay: 12-month realized or beta <0.8 vs. the S&P 500. In practice, you’ll cut a lot of cyclicals that need perfect freight and energy to work (yes, I said I’d get back to freight, I buried the lede earlier).
• Dividend growers over high yielders. Payout growth signals unit economics and governance. High headline yields with fragile margins are classic yield traps when input costs and tariffs pinch.
• Proven price pass-through: gross margin resilience during the 2018-2019 tariff period is the cleanest yard test we’ve got without overfitting to pandemic weirdness.

Who to underweight (and I know this sounds harsh): import-reliant, low-margin retailers and hardware OEMs with long, Asia-heavy supply chains. They suffer a double whammy, tariff friction on COGS and limited room to move price without losing the sale. If you must own them, demand net cash and demonstrable 2019 margin hold.

Quick philosophy pause: I’m all for humility, screens are guardrails, not gospel. I’ll miss a hero stock here and there. Fine. But the batting average improves when you let the Quality/Low Vol scaffolding carry the weight and you let management teams with real pass-through histories do the talking. And, okay, small burst of enthusiasm here, when this setup works, it really works, because you’re compounding at the balance sheet while everyone else chases a headline.

Bottom line: tilt to U.S.-centric Quality and Low Vol; test for 2018-2019 pricing power; prefer dividend growers; and keep your exposure light to import-heavy, low-margin stories that need perfect macro to clear the bar.

Put it together: ETFs, hedges, and a sane rebalancing plan

Alright, here’s the investable, low-drama version that fits in a normal brokerage account, doesn’t torch your tax bill, and keeps optionality if tariffs bite and growth cools. I’m using liquid ETFs with tight spreads (think 1-3 bps on screen for the big ones) and low fees, because alpha you don’t keep isn’t alpha.

Core equity sleeve (target 55-65% of the portfolio depending on your risk budget):

• Defensives by sector: Consumer Staples (e.g., XLP, 0.10% expense), Utilities (XLU, 0.10-0.12%), Healthcare (XLV, 0.10%). These are boring on purpose. And boring is good when margins elsewhere are getting squeezed by tariff pass-through and wobbly end-demand.
• Quality-factor core: iShares MSCI USA Quality (QUAL, 0.15%) or Invesco S&P 500 Quality (SPHQ, 0.15%). Quality historically preserves earnings better in slowdowns. If I just said “downside capture,” I mean it typically falls less than the market in weak tapes. Simpler: it gets hit less.
• Domestic reshoring tilt: small/mid-cap industrials with U.S.-centric footprints, think IJH (0.05%) or IJR (0.06%) plus a sleeve in industrials (XLI, 0.10%) if you want a cleaner tilt. Keep this to a tilt, not the driver.

Bond ballast (25-35%):

• Short-to-intermediate Treasuries for recession risk and liquidity: SHY (1-3Y, 0.15%), IEI (3-7Y, 0.15%) or Vanguard VGIT (intermediate, 0.04%). Treasuries tend to be your dry powder when the economy stalls.
• TIPS if goods inflation re-accelerates: SCHP (0.05%) or TIP (0.19%). I’d add TIPS as a toggle, 0-10% of the whole portfolio, keyed to whether you’re seeing broad goods CPI reheat. Not predicting it, just paying for the umbrella only if the clouds roll in.

Hedges (use sparingly):

• Protective puts on cyclicals or a low-vol overlay. A practical version: buy 3-6 month puts on your cyclical sleeve (e.g., XLI or SMID industrials) when implied vol is near its 1-year median and the tape is complacent. If that sounded too jargony, translation: buy insurance when it’s reasonably priced, not after the storm starts.
• Covered calls on defensives to harvest premium if volatility stays bid. Writing 1-2% out-of-the-money monthly calls on XLP/XLU/XLV tends to pull 0.5-1.2% in premium per month in average vol regimes (premium varies a lot; monitor ex-div dates and your tax situation). Keep assignment risk in mind, don’t sell calls over names you refuse to let go.

Position sizing:

• Keep cyclical tariff beneficiaries, metals, certain capital goods, small and satellite. Think 1-3% each, 5-10% aggregate. These can pop on headlines, but they can also gap the other way on policy whiplash. Your core is Quality + defensives, not a steel tape.

Taxes (the un-fun alpha):

• Tax-loss harvesting on laggards, swap into close substitutes to maintain exposure and avoid the 30-day wash-sale tripwire. Always the 30-day rule, no exceptions.
• Place high-yielding defensives and covered-call sleeves in tax-deferred accounts when you can. Short-term option premium is generally taxed at ordinary income rates; qualified dividends in taxable accounts are typically 0/15/20% depending on bracket, with a potential 3.8% NIIT at higher incomes (current law in 2025). Location matters.

Rebalance rules:

• Use pre-set bands, 5% around target weights is a sensible default, to avoid headline-chasing. When QUAL or Staples rip and pierce the band, trim; when SMID industrials sink and breach the lower band, add. Your future self will send you a thank-you email you’ll never read.

Quick cost check while we’re at it: the sector and factor ETFs above mostly cluster in the 0.05-0.15% fee range, and the big Treasury funds sit at 0.04-0.15%. On large funds, bid/ask spreads are routinely 1-2 cents, call it low single-digit basis points, so trading friction stays contained. That’s real money over a few years.

And here’s where my tone picks up a bit, because this is the part that feels good when you run it for a couple of quarters. You’ve got a spine of Quality and defensives, ballast in Treasuries, a toggled TIPS sleeve if goods inflation heats up, and a small basket of cyclical beneficiaries you can feed or starve without touching the core. Add a touch of optionality via puts when they’re reasonably priced, and milk a little carry with covered calls on the stuff you’re happy to trim. It’s not fancy, it’s just…repeatable.

One last thing I tell clients (and myself): don’t oversteer. Pre-commit to the bands, keep the satellites as satellites, and remember the goal is compounding after fees and taxes. The screens are the guardrails; the plan is the map.

Frequently Asked Questions

Q: Should I worry about my whole portfolio if tariffs go up and job growth cools?

A: Short answer: no, not the whole thing. Shift, don’t sprint. Trim import‑heavy, low‑margin names; add firms with pricing power, domestic revenue, and clean balance sheets. Think high gross margins, inflation pass‑through, and low direct Chinese input exposure. Rebalance; don’t panic-sell. I’ve regretted the panic trade way more than the rebalance.

Q: How do I screen for stocks that hold up when tariffs rise and hiring slows?

A: Use a simple, disciplined screen: 1) Gross margin above 50% (pricing power). 2) Cost of goods with less than 10% direct exposure to tariffed imports (ask IR or read 10-K sourcing notes). 3) Revenue 70%+ domestic to reduce FX and cross‑border friction. 4) Net debt/EBITDA under 2x to avoid refinancing pain if growth cools. 5) Contractual pass‑through or CPI clauses (utilities, defense cost‑plus, some software maintenance). 6) Free cash flow margin above 10% and low inventory dependence. Then sanity‑check cyclicality: services/software with subscription models usually ride out soft labor prints better than discretionary retailers. If you must hold import‑sensitive names, consider partial hedges (protective puts into key tariff headlines) and keep position sizes honest. I still have scars from 2018 ignoring that last part.

Q: Is it better to tilt toward domestic producers or exporters when tariffs rise and jobs soften?

A: Generally, a modest tilt to domestic producers with spare capacity and healthy balance sheets makes sense. They can gain share as imports get pricier. Look for businesses with variable costs and room to raise price without losing volume, packaging, certain building materials, some specialty chemicals. But don’t automatically dump exporters. If a company sells globally and sources locally (regionalized supply chains), it can reroute volumes and protect margins. Also, a softer labor market often cools the dollar’s momentum, which can actually help some exporters on translation. What I avoid in size: import‑dependent, low‑margin assemblers and discretionary retailers that must eat cost inflation. Keep it balanced: overweight domestic substitution plays and subscription or regulated cash flows; keep selective exporters that have pricing power and diversified sourcing. And keep dry powder, tariff headlines usually create tradable dislocations.

Q: What’s the difference between pricing power and import exposure, and how does that change winners and losers if tariffs rise?

A: Pricing power is the ability to raise prices without losing customers (brand, switching costs, regulation, or mission‑critical status). Import exposure is how much of your cost stack comes from tariff‑hit inputs. You want high pricing power, low import exposure. Examples: Winners: – Software with mission‑critical subscriptions and minimal hardware (high margin, near‑zero COGS). – Regulated utilities or pipelines with cost pass‑through mechanisms. – Defense contractors on cost‑plus contracts. – Domestic producers that substitute for imports (cement, certain steel mini‑mills) if they aren’t power‑ or import‑input constrained. Mixed: – Healthcare services with contracting power but labor intensity; soft jobs can ease wage pressure, helping margins. – Consumer staples with strong brands; they can pass price, but watch private‑label trade‑down. Vulnerable: – Apparel, furniture, and electronics retailers importing finished goods at thin margins. – Auto parts assemblers reliant on tariffed components with weak pass‑through. Practical moves: screen for gross margin above 50%, revenue 70%+ domestic, explicit pass‑through language, and net debt/EBITDA under 2x. Pair trades help: long domestic share‑gainers, short import‑dependent peers. For existing vulnerable holdings, scale down size or use puts around policy dates, cheaper than learning the wet‑piano lesson again.

@article{best-stocks-if-tariffs-rise-and-jobs-weaken-2025-guide,
    title   = {Best Stocks if Tariffs Rise and Jobs Weaken: 2025 Guide},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/best-stocks-tariffs-jobs-weak/}
}