4 Safe ETFs to Play as Tariff Tensions Heat Up

U.S. stocks are wavering as investors have braced themselves for potential shifts in tariff policies from President Donald Trump. Markets remain cautious as Trump prepares to unveil his universal like-for-like tariff plan, set for midweek. On Feb. 10, the President imposed 25% tariffs on all steel and aluminum imports starting March 4, intensifying pressure on top trading partners Canada and Mexico. Investors are weighing the potential impact of a trade war on corporate earnings, global growth and inflation.

Trump's steel tariffs could trigger a broader trade war as the EU threatens ‘proportionate countermeasures. Tensions between the United States and China had already escalated after the United States implemented a 10% tariff on Chinese imports on Feb. 4. In response, China retaliated with tariffs on U.S. products, including a 15% levy on coal and liquefied natural gas LNG and a 10% tariff on crude oil, agricultural machinery and automobiles from Feb. 10.

Meanwhile, UBS believes that the U.S. effective tariff rate on China will eventually rise to 30% from the current 11%. Investors are also worried about the Fed's policy momentum. Markets are eager for insights on how tariffs could influence inflation (read: 5 Sector ETFs Walk a Tightrope Amid Trade Tensions).

ETFs to Play

Against this backdrop, below we highlight a few safe exchange-traded funds (ETFs) that could be gainful in the near term.

SPDR Gold Trust GLD

Gold is often viewed as a safe-haven asset. Gold prices jump at the time of economic uncertainties. No wonder, gold prices surged to a fresh record as investors sought safety amid economic uncertainty. Note that unlike fiat currencies, which can be printed in unlimited quantities, gold has a finite supply. This scarcity helps maintain its value. Lately, demand for gold from central banks has been pretty high (read: 5 Reasons Why Gold ETFs Are Smart Bets Now).

Consumer Staples Select Sector SPDR ETF XLP

In periods of economic uncertainty, market volatility, or inflationary pressures, the consumer staples sector is often considered a safe investment. The sector sells essential goods with steady demand. Unlike discretionary sectors, where spending fluctuates with economic cycles, consumer staples tend to have predictable revenues and earnings. Many consumer staples companies have a long history of paying consistent and growing dividends.

Utilities Select Sector SPDR ETF XLU

The utility stocks also get a safe-haven tag. Utilities provide essential services such as electricity, water, and natural gas, which people and businesses rely on regardless of economic conditions. This makes the sector non-cyclical, meaning demand remains stable even during recessions. Utilities can often pass increased costs to consumers through regulated rate adjustments. Moreover, the latest AI boom has brightened the demand for utilities even more as this sector satisfies the AI industry's energy needs.

Invesco CurrencyShares Japanese Yen Trust FXY

The Japanese yen is widely recognized as a safe-haven currency, often appreciating during economic uncertainty, market volatility and geopolitical instability.Japan's consistent current account surplus indicates that the country is a net creditor to the world, bolstering confidence in the yen during turbulent times. The Japanese yen has been in great shape lately due to Bank of Japan's hawkish monetary policy (read: Time for Yen ETF?).

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SPDR Gold Shares GLD: ETF Research Reports

Consumer Staples Select Sector SPDR ETF XLP: ETF Research Reports

Invesco CurrencyShares Japanese Yen Trust FXY: ETF Research Reports

Utilities Select Sector SPDR ETF XLU: ETF Research Reports