SUMMARY:

Donald Trump's policy stance has begun to look more openly anti-consumer, with tariffs, trade frictions and price pressures rising up the agenda. This article looks at the sectors and types of stocks that could prove relatively resilient, and the risks UK investors should weigh.

Key points

  • Higher tariffs and policy friction could squeeze US consumer spending power in the near term.
  • Defensive sectors such as staples, healthcare and utilities are often considered shelters in such periods.
  • Discount retailers and value brands may benefit as shoppers trade down.
  • Repair, refurbishment and second-hand businesses could see Demand if big-ticket spending falls.
  • UK-listed firms with significant US exposure may be affected in both directions and need careful review.

Why this matters now

Donald Trump’s second term has brought a more openly confrontational stance towards trade partners, with tariffs, threats of further trade measures and a tougher line on imports forming a recurring theme. Many economists have warned that these policies could ultimately fall on US consumers through higher prices, even as the political messaging blames foreign producers. For investors, the effect on company Earnings is more important than the rhetoric.

UK investors with global funds or US-focused ETFs hold meaningful exposure to American consumer companies, from retailers and restaurants to apparel and travel groups. Several UK-listed multinationals also generate large slices of Revenue in the US, including consumer goods groups, drinks companies and industrial businesses. A change in the spending mood of the US consumer ripples through to FTSE 100 Dividend streams.

The combination of a still-resilient US economy, sticky Inflation in places and the prospect of further tariffs makes for a complicated backdrop. Investors will be watching how price-sensitive shoppers behave, whether companies can pass costs on, and which Business models tend to do relatively well when discretionary spending weakens. The list of potential winners is narrower than in a normal cycle and demands careful analysis.

This article does not predict particular share-price moves. Rather, it sets out the categories of stocks that historically have appeared more resilient when consumer pressure builds, and the questions UK investors should be asking before drawing conclusions.

The latest picture

Recent US economic data has shown a mixed picture. Headline retail sales have remained reasonably strong, but lower-income households have appeared to feel the pinch more, with evidence of trading down to cheaper brands and own-label products. Credit card balances and delinquencies are worth monitoring, with the latest figures available from the Federal Reserve.

On the policy side, the administration has used tariffs as both a negotiating tool and a revenue source. The exact level and scope of tariffs has shifted over time, and investors should check the latest US Trade Representative announcements and official US government documents for current rates. Companies that rely heavily on Chinese imports, low-cost Manufacturing or globally extended Supply chains have flagged Margin pressure in their trading updates.

Meanwhile, surveys of consumer sentiment have started to soften in some categories, particularly for big-ticket items such as cars, white goods and home improvement. Earnings statements from US retailers and consumer goods companies have shown that promotion intensity is rising, and that mid-tier brands may face the most pressure as shoppers split between premium and value.

What investors need to know

When consumers feel squeezed, spending does not disappear, it changes shape. Households tend to delay big-ticket purchases, trade down to cheaper brands, repair rather than replace, and reduce discretionary outings. Retail categories such as discounters, dollar stores, off-price chains and own-label specialists have historically been beneficiaries.

Defensive consumer staples groups – producing food, drink, household products and personal care items – also tend to hold up relatively well, although margins can be tested when input costs rise faster than retail prices. Healthcare, utilities and certain telecoms businesses are usually included in the same defensive bucket because demand is less tied to discretionary spending.

UK investors should remember that headline ‘defensive’ status does not protect against company-specific risks. Even resilient sectors include weaker players with stretched balance sheets, Brand challenges or governance issues. Reviewing individual companies’ latest annual reports, Debt levels and dividend cover is essential before deciding whether a stock fits a defensive role in a portfolio.

The other key consideration is currency. A weaker dollar, or sharp moves in sterling, can change the translated earnings of UK-listed multinationals selling into the US. Currency hedging at fund level, and overall portfolio currency exposure, deserve a careful look.

The bull case

Bulls argue that an anti-consumer stance from Washington plays directly into the hands of business models built for value-seeking shoppers. Discount retailers, off-price chains and own-label suppliers could gain Market Share as households trade down. Companies focused on repair, refurbishment and second-hand goods may also see stronger demand as people seek to keep older products running.

In the staples space, large global brands with strong pricing power, efficient supply chains and exposure to emerging markets may benefit from a broader rotation into defensive sectors. UK-listed consumer goods groups with substantial US sales could see relative outperformance if growth elsewhere remains intact and US consumers gravitate to trusted brands.

There is also a potential winner among UK retailers with strong loyalty programmes and value propositions, although the read-across from US policy is indirect. Investors may also consider businesses tied to essential services – insurance, basic healthcare, food retail and utilities – which often appear less sensitive to short-term policy shocks.

Finally, dividend-focused investors may find that the search for income drives Capital into established companies with reliable cash flows, which could support valuations even in a more difficult macro backdrop.

The bear case

The bear case is that there are no genuine winners from a sustained squeeze on consumers. Even ‘defensive’ companies face slower top-line growth, higher input costs and pressure to support customers through promotions. Margins can be eroded just when investors are seeking safety.

Tariffs themselves are an unpredictable tool. Sudden changes can hurt companies that rely on imported components, including some retailers, automakers and consumer electronics groups. Even businesses positioned to benefit from trading-down behaviour can be caught out by sourcing pressure or rapid changes in Import duties.

The wider risk is that policy uncertainty undermines business Investment, hits employment, and ultimately feeds back into weaker household incomes. In that scenario, even staples and discounters may struggle. UK-listed multinationals would not be immune, particularly those with US-focused growth strategies.

A final risk is sentiment. Markets can rotate aggressively when narratives shift, and stocks bought purely as defensive ‘bond proxies’ have suffered in past cycles when interest rates moved against them. Investors should think carefully about valuation as well as story.

Market context

Across the Atlantic, the US Equity market is sitting on elevated valuations, with the S&P 500 still heavily skewed to a small group of technology and consumer-platform companies. Any rotation towards defensives, value retailers or staples would represent a meaningful shift in market leadership, and could affect global indices through index-weighted funds.

In the UK, the FTSE 100 includes some of the world’s largest consumer goods, drinks and tobacco companies, all of which have substantial US sales. Their share prices have been influenced as much by interest-rate expectations and currency moves as by company-specific factors in recent years. A more defensive market environment could see renewed interest in these names, although nothing is guaranteed.

Sterling, the dollar and the euro will all matter. UK investors should monitor the Bank of England and Federal Reserve commentary, alongside the ONS inflation data, to judge how the macro backdrop is shaping up. Bond yields and credit spreads are also worth watching, as they often signal stress before equity markets respond fully.

What could happen next?

Investors will be watching trading updates from US retailers, consumer goods groups and big-box chains for guidance on price elasticity, margin pressure and customer behaviour. UK-listed multinationals with US exposure will also provide important read-across in their next interim and full-year results.

Policy developments matter just as much. Any change in Tariff scope, retaliation from trade partners or new consumer-focused measures could move sectors rapidly. The next round of Central Bank decisions and inflation prints will shape expectations for both consumer spending and the discount rate applied to future earnings.

At portfolio level, this is a moment to review individual holdings rather than make sweeping changes. Investors may wish to assess concentration in US consumer cyclicals, the quality and durability of dividends, and the balance between defensive and growth holdings within their ISAs and SIPPs.

What investors should watch next

  • Latest US tariff and trade announcements from official government sources
  • Trading updates and RNS announcements from FTSE 100 multinationals with US exposure
  • US retail and consumer goods earnings releases
  • Federal Reserve and Bank of England policy decisions
  • ONS inflation data and US CPI releases
  • Currency movements between sterling, dollar and euro
  • Dividend announcements and cover figures from defensive UK stocks
  • Consumer sentiment indices and credit card data
  • Supply chain and logistics reports from major retailers
  • Sector rotation trends within global equity benchmarks

Key takeaways

  • Anti-consumer policy moves may favour value retailers, staples and defensive sectors but no group is risk-free.
  • Repair, refurbishment and own-label brands could see stronger demand if households trade down.
  • UK-listed multinationals with US exposure deserve a careful review of currency and pricing power.
  • Tariffs can move fast and create both winners and losers within the same sector.
  • Portfolio Diversification, dividend quality and Balance Sheet strength remain key tests.