3 Stocks To Watch For When Tariffs Subside
Everyone in the global financial markets is focused on the potential effects that might continue to develop from President Trump's recent trade tariffs in the United States, affecting stocks in every other country and sector. With this in mind, there are two likely scenarios that retail investors need to consider when strategizing their portfolios' future.
The first is a challenging trade environment that will be sustained in the coming years, slowing global GDP growth and economic activity as well. That is not likely to play out, as the world economy would have to be cut significantly to de-globalize effectively. The other, more likely scenario is that a deal is struck with the United States and its trading partners soon, leaving most (if not all) of these fears in the past moving forward.
Under this more realistic scenario, there are three stocks that investors need to keep in mind for the future of their portfolios, as there is nearly a “no-brainer” status attached to them once the fears of tariffs are removed from the equation. For technology stocks in China, Alibaba Group (NYSE: BABA) is unmatched, and then West Fraser Timber Co. (NYSE: WFG) along with Canadian National Railway (NYSE: CNI) for Canada’s industrial sector rebound.
Alibaba Stock: An Unlikely Favorite
When this stock broke out of the developed range over the past two years, everyone thought that Alibaba was the best thing in the market, forgetting about China and all of the negativity that today seems to be the only thing investors associate with the nation’s stock market.
Now that tariff rollouts make it clear that China is the main target of these blockades, short sellers and panicked bulls have centered on Alibaba to bring it into lower prices, forgetting that only a couple of months ago, this was a darling stock with lots of upside. However, some in the market haven’t forgotten the company’s future potential.
When Wall Street analysts are asked, Alibaba is still a good place to be. As of mid-April 2025, those from Mizuho decided to initiate their rating on the stock with a Strong Buy, with no price valuation this time around. For pricing guidance, investors should place a bigger weight on the ratings that came in before the tariff announcements since they reflect more of the reality in the underlying business.
Because some exemptions and pauses were made on these tariffs, Alibaba's worst-case scenarios are starting to fade. This is why the $180 per share valuation from Morgan Stanley analysts (Placed in February 2025) can be a more realistic view of the company. With this view, investors imply that Alibaba stock could rally by as much as 51% from where it trades today.
Canadian Lumber Trades Again
As President Trump’s agenda becomes clearer, which is to bring logistics and supply chain firepower back to the North American region (including Mexico and Canada), investors can start targeting some of the previously hit Canadian stocks that are indispensable to the economy's functioning.
One of these stocks is West Fraser, one of Canada’s largest lumber exporters, which annually satisfies most of the housing market’s needs in the United States. With this status and market share, it is a near guarantee that the price will recover once more clarity hits the market.
Short sellers have also acknowledged this trend, considering that the company’s short interest declined by 8.2% over the past month alone, a clear sign of bearish capitulation. This capitulation concerns the previous fundamental thesis and view and how Wall Street feels about West Fraser stock.
With a consensus price target of $100.4 per share, analysts see the stock going higher by as much as 38% from where it trades today, and that is likely pricing in the reality of the company’s true value, excluding tariff uncertainty.
Transportation Needs Won’t Go Away
Suppose the market is bullish on lumber production and exports out of Canada. In that case, it must (by extension) also be bullish on the transport services that deliver this lumber to its destinations across Canada and the United States. This is where Canadian National Railway stock comes into play.
This connection can be made immediately by looking at how analysts from the Royal Bank of Canada saw the stock in January 2025, again reflecting a clearer reality for the company excluding the current temporary effects of trade tariff negotiations.
These analysts still think (as evidenced by no change in their rating) that Canadian National Railway stock should be trading around $171 per share, calling for as much as a 75.2% upside from where it has fallen today. Like in West Fraser’s case, 35% of the stock’s short interest has collapsed over the past month, making it clear that this bull trend is about to happen.
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