These stocks stand to benefit if a Trump White House adopts a tougher stance on China

By James Rogers

The U.S. trade war with China escalated during the Trump presidency

The possibility of another White House term for Donald Trump raises the prospect of the U.S. taking an even tougher stance on China - and a number of sustainability and mobility stocks would be set to benefit, according to Baird Equity Research.

Trump, who is expected to address the Republican National Convention in Milwaukee on Thursday evening as the party's presidential nominee - just days after surviving an assassination attempt last weekend - escalated a trade war with China during his presidency. This has fueled expectations of a similar agenda if he is victorious in November, with the possibility of higher tariffs on imports from China.

Set against this backdrop, solar-technology company First Solar Inc. (FSLR), lithium producer Albemarle Corp. (ALB), electric-vehicle maker Rivian Automotive Inc. (RIVN) and rare-earth specialist MP Materials Corp. (MP) are set to benefit the most from a tougher stance against China, according to Baird Equity Research analyst Ben Kallo.

Related: This is what a Trump White House could mean for tech M&A, Tesla and tariffs

"FSLR benefits the most from the IRA [Inflation Reduction Act], but also arguably stands to benefit the most under higher tariffs/more trade restrictions," Kallo wrote in a note released Thursday.

The Inflation Reduction Act was signed into law in 2022, offering climate and clean-energy tax incentives as part of the Democrats' attempt to address climate change. "Even with a Republican sweep in the November election, we believe the Inflation Reduction Act's incentives for sustainable energy and mobility companies will remain largely intact," Kallo said.

Separately, a Trump administration's removal of electric-vehicle tax credits would be a "slight negative" for Albemarle, according to Kallo, who noted that this would be "only slight" due to the limited number of models currently qualifying for tax credits. "More stringent requirements on where lithium is sourced could be a positive for ALB due to its potential domestic production and diversification in location of resources," he wrote.

Related: Nio, Alibaba shares fall on weak China data and improved odds of a Trump win

With regard to MP Materials, a removal of EV tax credits could slow demand for rare earths in electric vehicles, Kallo noted. "At the same time, if domestic-content requirements become more stringent and/or foreign relations with China worsen, this could benefit MP as one of two non-Chinese rare-earth suppliers of scale," he added.

Other analysts have also weighed the possible impact of a Trump administration on the electric-vehicle industry, and Tesla Inc. (TSLA) in particular.

"We believe a Trump presidency would be an overall negative for the EV industry as [it's] likely the EV rebates/tax incentives get pulled, however for Tesla we see this as a potential positive," wrote Wedbush Securities analyst Dan Ives in a note released July 11. "Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV-subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, Nio, etc.) from flooding the U.S. market over the coming years."

The U.S.-listed shares of a host of China-based companies, including electric-vehicle maker Nio Inc. (NIO) and e-commerce giant Alibaba Group Holding Ltd. (BABA), slid earlier this week following data showing China's economy grew at a weaker-than-expected rate during the second quarter. The increasing odds of a Trump victory in the presidential election may have also weighed on the stocks.

Tomi Kilgore contributed.

-James Rogers

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07-18-24 1732ET

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