Developments over the weekend show just how quickly trade policies around the world can impact companies. Fresh tariff measures could negatively impact some UK growth stocks, both through trade with the US and by straining supply chains.
Here are two on my watchlist to monitor in the coming weeks as things pan out.
Utility costs abroad
I’m referring to the announcement on Saturday (17 January) by President Trump to impose new import tariffs on several key European allies, including the UK. This comes in response to opposition to US efforts to gain control of Greenland. Trump said that starting next month, a 10% tariff would be applied to all goods these countries export to the US. That rate will rise to 25% in June if no agreement’s reached.
One company this could be bad news for is National Grid (LSE:NG), a stock up 27% in the past year. Some think of the business as operating only in the UK, but in reality it has exposure in the US. While most of its US business revenues come from gas and electricity networks in states like New York, its infrastructure deployment and operating costs can be influenced by the cost of imported goods. This means components and materials are often sourced from the UK or routed through global supply chain. As a result, it will make them exposed to US tariffs.
For example, any specialised grid equipment that’s manufactured in the UK before installation in the US will now become more expensive. One implication is that higher import costs could squeeze profit margins. This could force National Grid to absorb costs and become less profitable.
A history of tariff impacts
Croda International (LSE:CRDA) is another stock in focus. The chemical supplier trades worldwide, including in America. In the latest published full-year accounts, it made up 24% of total sales. While a large portion of its business is generated inside the US through local manufacturing (estimated to be around 70%), it still exports some products from the UK and Europe into the US market.
The proposed 10% tariff on imports makes those exported goods more expensive for US buyers, which can reduce demand. Consumers might simply switch to other domestic alternatives.
Indeed, in prior tariff rounds, Croda said it would apply a tariff surcharge on certain products to cover incremental costs. It’ll be interesting if this happens again this time around, and how investors decide to react.
The stock’s down 14% over the past year, although I wouldn’t specifically attribute all of this to trade tensions. The company has been focusing heavily on cost-cutting and becoming a more efficient enterprise. The H1 results from last summer detailed £100m of annualised savings by the end of 2027.
To be clear, I’m not suggesting that investors should immediately sell any stock in either company. But I’m going to put both on my watchlist as companies that could see high volatility if tensions rise further. In line with my Foolish investing approach, if we see a sharp fall, it could signal a long-term buying opportunity.
