President Trump is going scorched earth on America’s major European trading partners. Vowing to impose reciprocal tariffs on “every country” that hits U.S. products coming into their countries with import duties, he promised there will be no exceptions made.

Trump is also not just looking at straight-up tariffs either. The President has said value-added taxes (VAT) or devalued currencies would count as well, and countries that try to get around them by shipping goods to other countries before exporting them would immediately be hit with reciprocal duties as well.

That creates problems for a number of companies that operate primarily in the U.S., but import their products from overseas. For example, Netherlands-based Ikea could see the cost of its cheap, DIY furniture rise while U.S. pharmaceutical stocks could be hurt if they import drugs sold here. 

Eli Lilly (NYSE:LLY), for example, the manufacturer of fast-growing diabetes and weight-loss drugs Mounjaro and Zepbound, could see costs increase because the active ingredients used in the treatments, tirzepatide, is produced at its facilities in Ireland.

Below are two surprising stocks that could be affected by a trade war breaking out.

Costco (COST)

Warehouse club Costco (NASDAQ:COST) could be victimized by Trump’s tariffs on Europe. That’s because, although most of its stores are located in the U.S., the retailer imports most of its goods from elsewhere in the world. 

For example, when Trump announced tariffs (since temporarily delayed) on Canada and Mexico, the cost of Costco’s grocery prices were expected to rise. Costco imports things like beef, pork, and vegetable oils from Canada while much of its beer, liquor, tomatoes, and avocados come from Mexico.

China is obviously another country where a large proportion of products emanate from — it is actually the largest — yet it also sources goods from across Europe. The Observatory of Economic Complexity says Italy and Norway are two of Costco’s major home ports for goods.

Costco doesn’t break out by country of origin where it imports from, so there is no exact figure, but a global trade war with tariffs rising across the board would impact the retailer tremendously and it notes in its SEC filings that “higher tariffs could adversely impact our results.”

Moreover, Costco could feel the pinch in the warehouses it operates in other countries too. While 69% of its 870 clubs are located in the U.S., hundreds operate elsewhere and will be penalized as those countries respond with even more tariffs of their own.

We often forget how interconnected the world has become, but leveling the playing field will come with some high costs.

Amazon (AMZN)

It is probably not surprising that Amazon (NASDAQ:AMZN) would also get caught up in a trade war. Because it is a platform for sellers, not a manufacturer, most of its products come from other countries, primarily China.

It also operates in dozens of markets outside the U.S., with Germany, the U.K., and Japan being the largest ones. Between the U.S. and those three, Amazon derives 70% to 80% of its sales there. 

Obviously the U.S. represents the lion’s portion of site visits, or some 45% of the total, but that trio of countries each account for about 10% of the total. Expando, the largest agency helping European sellers sell goods in the U.S. notes that around one-quarter of all Amazon sales in the U.S. are shipped overseas.

Although Amazon doesn’t always have the lowest prices, 66% of all consumers still begin their search for a product on Amazon. Tariffs could significantly disrupt its operations and might even invite closer regulatory scrutiny of its business.

When Trump imposed new tariffs on China, it immediately launched an investigation into Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google for antitrust violations. As the dominant e-commerce player throughout Europe, retaliatory probes into Amazon could be on the horizon.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.