Analysts Warn Trump Tariffs Could Hit Semiconductors, Retail, and Softlines Hard

Market reaction to President Trump’s sweeping tariff announcement has been swift and brutal, with equities under heavy pressure and analysts issuing warnings across industries. While the baseline 10% universal tariff was troubling in itself, it’s the country-specific “reciprocal” levies—as high as 54% for China and up to 49% for countries like Cambodia—that have sparked the most concern. The new framework, described by some economists as “the highest effective tariff wall since the 1930s,” has already forced a rethink of corporate cost structures, earnings outlooks, and sector-level positioning.

Softlines Under Siege

UBS was quick to sound the alarm on softline retailers—those primarily exposed to apparel, footwear, and accessories. In a note Thursday morning, analysts at the firm called the tariff announcement “more negative than expected,” highlighting that virtually every company in the group will feel a significant margin hit. ubs estimates several hundred basis points of gross margin erosion may be unavoidable for many brands, with few options left but to pass along higher prices.

That may not be easy. “We expect the financial impact to be felt on revenue as consumers buy disproportionately fewer units,” UBS said, noting that elevated pricing won’t be absorbed quietly in a softening demand environment. Among those named at risk were TJX and Burlington Stores (BURL)—both given “Buy” ratings by UBS for their relative insulation and scale, though the outlook is far from rosy.

Broadlines/Hardlines: Differentiated Risks

KeyBanc Capital Markets (KEYB) weighed in on broadlines and hardlines, singling out Wayfair (W), Williams-Sonoma (WSM), RH, and Best Buy (BBY) as most exposed due to their high reliance on imported furniture and electronics. Dollar stores like Dollar Tree (DLTR) and Five Below (FIVE) are also considered vulnerable due to fixed pricing models and Chinese sourcing, though KeyBanc highlighted that Walmart (WMT) may benefit on a relative basis as the dominant low-cost provider.

On the flip side, smaller-cap Ollie’s Bargain Outlet (OLLI) was cited as better insulated due to limited direct import exposure. Mattress firm SGI (formerly Tempur Sealy) also earned an exception thanks to synergy tailwinds from its acquisition of Mattress Firm.

Semiconductors: Exempt, but Not Immune

Despite being officially excluded from the reciprocal tariffs, the semiconductor sector is far from safe, analysts said. KEYB noted that while semiconductors, along with steel, copper, and pharmaceuticals, dodged direct levies, the indirect demand impact could be sweeping.

“Tariffs on China, Taiwan, and Vietnam will choke demand in smartphones, PCs, and autos—end-markets that rely heavily on semiconductor content,” the note said. UBS echoed that view, warning that most chipmakers under their coverage will face negative downstream effects. The broad hit to consumer electronics and infrastructure capex could dent growth visibility in what had been one of the market’s most defensible corners.

“Semis don’t work again in earnest until the AI export rules are clarified,” UBS said, referring to the looming May 15th deadline for AI diffusion regulations.

Global Supply Chain Fallout and Unanswered Questions

The geographic breadth of the tariffs caught strategists off guard. Trump’s levies hit U.S. allies across Asia, including Vietnam (46%), India (26%), Japan (24%), and Taiwan (32%). The hardest-hit industries—consumer goods, electronics, and automotive—have spent years diversifying supply chains away from China only to be penalized again.

Deutsche Bank estimated that average U.S. import tariff rates could now rise to between 25% and 30%, up from just 9% a year ago. And despite exemptions for semis, the broader environment is making it harder for companies like Apple, Nike, and Lululemon to navigate production choices.

With the April 9 deadline looming—when reciprocal tariffs officially take effect—analysts warn that the worst may still lie ahead. Investors looking for an “off-ramp” in negotiations may be disappointed. “There’s no clear way out,” said Andy Rothman of Sinology. “Trump’s tariffs aren’t a bargaining chip. They’re a policy stance.”

For now, strategists are advising investors to brace for earnings downgrades, slower growth, and rising inflation. J.P. Morgan expects the tariffs to raise core inflation by 1.5 percentage points this year, a shock economists liken to the largest tax increase since 1968.

Bottom Line: Markets are adjusting to the new trade reality, but clarity remains elusive. With consumer pricing pressure mounting and global demand softening, sectors like semiconductors, retail, and discretionary goods are entering a period of unusual uncertainty—one that no spreadsheet can fully model.

Ask Aime: What impact will President Trump's tariff announcement have on the stock market?