Individual Stocks May Be Exposed to Unknown Risks as a Result of Tariff Negotiations

The initial panic in the stock market following former President Donald Trump’s announcement of new tariffs on April 2 has started to ease. However, many investors are still uneasy, particularly those who worry their favorite stocks may yet feel the ripple effects of a trade war.

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Two weeks have passed since Trump’s “reciprocal” tariff plan was unveiled, and although some of the most impactful levies have been temporarily delayed until at least July, there’s been no concrete progress in finalizing any new trade agreements. While the White House insists that active discussions are taking place with several countries — Japan among them — details remain vague, and no timelines have been confirmed.

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“We haven’t seen any real results yet from the tariff talks,” said Scott Welch, chief investment officer at Certuity. “The administration says it’s close to signing trade deals with around 15 nations, but we haven’t seen anything signed or finalized.”

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The uncertainty surrounding the duration of the negotiations is just one concern for the market. Another is how the finalized terms — especially sector-specific tariff details still under consideration — might directly affect individual companies. These uncertainties are weighing heavily on both investors and corporate leaders.

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A sharp example of how unpredictable the situation remains came last week when chipmaker Nvidia disclosed a $5.5 billion charge tied to export restrictions on its H20 processors. This news triggered a significant drop in the company’s stock — down 6.9% on Wednesday and another 2.9% on Thursday before the weekend.

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“Clearly the Trump rug remains in full effect,” wrote Bernstein semiconductor analyst Stacy Rasgon in a note to clients on April 16, suggesting that investors are still vulnerable to policy-driven surprises from the former president.

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Although the chip export restrictions aren’t necessarily part of the tariff framework, Trump has hinted that negotiations could encompass a wide range of unrelated matters — from financing an Alaskan natural gas project to the forced sale of TikTok. This broad scope makes it hard to predict which companies might be caught off guard by the next policy announcement.

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Meanwhile, foreign investors seem to be shifting their attention away from U.S. markets altogether, which is putting additional pressure on stocks. The uncertainty surrounding trade policy, coupled with a broader selloff in major tech names, has intensified this trend.

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“When you keep toggling between starting and stopping negotiations, it may help retail investors stay engaged,” said Lawrence McDonald, founder of the Bear Traps Report. “But it doesn’t stop global investors from pulling their money out of big names like the Magnificent Seven.”

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Another area where these trade discussions could have a tangible impact is during earnings season. As companies prepare to update shareholders, analysts, and the public, executives are expected to speak more about how international trade dynamics might influence their future performance.

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Some may follow United Airlines’ approach and offer dual forecasts for 2025 — one with a stable trade environment, and one assuming continued volatility. Others might opt to withhold guidance altogether until there’s more clarity. Either way, these earnings calls could reveal unexpected vulnerabilities in some companies that the market hasn't priced in yet.

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Adam Parker, CEO of Trivariate Research, emphasized that investors are responding harshly to any sign of trouble. In a client note on Thursday, he noted that traders are punishing companies more than usual for downward revisions in earnings projections.

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“We’ve analyzed how the market reacts to negative EPS revisions over time, and what we’re seeing right now is extreme,” Parker wrote. “For earnings cuts greater than 5%, the average penalty over the past two months is in the 4th percentile compared to the last 25 years. That means only one in 25 months has seen this level of market punishment for downward revisions.”

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This suggests that in today’s uncertain trade environment, companies must be particularly cautious in managing investor expectations. Any misstep or unexpected hit from tariffs or export rules could spark a steep selloff.

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As long as trade negotiations remain unresolved and unpredictable, investors will likely continue to tread carefully. The market may have calmed somewhat since the initial tariff announcement, but with major policy questions still hanging in the air, the risk of sudden shocks remains high — especially for individual stocks vulnerable to international disruption.

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