Potential Impact of Trump’s Tariffs on Key ETFs: A Closer Look

As Donald Trump gears up for a possible return to the White House, his proposed tariffs on China could significantly affect various exchange-traded funds (ETFs). Funds that invest in electric vehicles, clean energy, and infrastructure could face challenges as Trump shifts public policy towards fossil fuels and oil drilling. This shift may undermine the growth these ETFs enjoyed during the Biden administration’s climate-friendly initiatives.

Three ETFs Likely to Face Challenges

Several Global X ETFs are expected to be adversely affected by Trump’s tariffs, given their strong ties to these sectors. Investors can use TipRanks’ ETF Comparison tool to analyze different ETFs based on metrics like assets under management (AUM), fund flows, expense ratios, technical indicators, dividend performance, and historical returns.

Among these ETFs, the Global X U.S. Infrastructure Development ETF (PAVE) has performed the best in the last three months. The ETF’s top holding, Trane Technologies (TT), has surged 84% over the past year. Nevertheless, if Trump’s tariffs increase the price of construction materials, it may pose challenges for the construction and infrastructure projects that dominate this ETF’s portfolio.

Another notable performer is the Global X Lithium & Battery Tech ETF (LIT). This fund emphasizes EV battery materials, especially lithium. While its significant investment in Tesla (TSLA) might cushion it during Trump’s presidency, other leading investments like the Chinese company NAURA Technology Group could struggle if tariffs hinder its chip exports to the U.S.

DRIV ETF: Potential Resilience Despite Tariffs

Interestingly, while the first two Global X ETFs have shown positive returns over the past six months, the Global X Autonomous & Electric Vehicles ETF (DRIV) is down by 4%. Initially, it might appear that a fund focused on electric vehicles would face difficulties under an administration unsupportive of clean energy. However, DRIV’s holdings include not only Tesla but also technology giants such as Nvidia (NVDA) and Alphabet (GOOGL), positioning it for potential strength in 2024 despite recent setbacks.

Wall Street analysts remain cautiously optimistic about the DRIV ETF, boasting a Moderate Buy consensus rating. This rating stems from 48 Buy, 23 Hold, and 5 Sell recommendations. Over the past year, DRIV has gained 6%, and its average price target of $27.50 suggests an upside potential of 18%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.