The US tariff cycle is amplifying existing macroeconomic pressures across a wide range of industries.
According to Allianz Trade’s latest Q2 Sector Atlas, nearly 90% of industries are now rated either medium or sensitive risk. Only 9% of sectors are rated low risk, which is well below the pre-pandemic share of 15%. The increase underscores how trade policy uncertainty, rising costs, and weakening demand are reshaping business strategies worldwide.
“Historically, most sectors have fallen between medium and sensitive risk,” said Ano Kuhanathan (pictured), head of corporate research at Allianz Trade. “What’s different now is the number of downgrades among industries that were usually strong.”
The cocktail of higher interest rates, squeezed margins, and slowing demand has left businesses hesitant to commit to long-term projects, Kuhanathan told Insurance Business. Some industries, particularly tech and pharma, may find ways to adapt and even thrive.
But for others – notably metals, autos, retail, and construction – the tariff era is compounding pressures from rates, margins, and shifting demand, making 2025 a year of selective resilience rather than broad recovery.
The auto industry epitomizes this shift. Integrated supply chains spanning North America, Europe, and Asia face escalating costs and deferred investments as tariff questions linger, particularly regarding trade with Mexico and Canada.
Meanwhile, the metals sector is absorbing the impacts of trade policy. With thin profit margins and heavy reliance on Asian inputs, many downstream manufacturers are grappling with higher costs and supply chain delays.
Retailers, especially non-food categories, are also vulnerable, according to Allianz Trade’s analysis. Still reeling from post-pandemic competition with e-commerce, brick-and-mortar operators face new tariff-driven pressures on imported goods.
Another notable downgrade has been in energy. Oil and gas firms that benefitted from post-pandemic price spikes have since cooled, while renewables face fierce competition from Chinese solar manufacturers.
“In the US, rollbacks on certain Inflation Reduction Act provisions have added to the strain on renewables,” Kuhanathan said. He added that European players who had banked on US projects are also feeling the squeeze.
Auto manufacturing in Germany and elsewhere in Europe has also suffered, while even traditionally resilient pharmaceuticals are on Allianz Trade’s watch list as US policymakers pursue both tariffs and price-cutting reforms.
Despite widespread strain, select industries are showing strength.
In the US, S&P 500 profits surged 12% year-over-year in Q2 2025, powered by mega-cap tech and AI-linked firms, alongside financials. Tech has been deliberately shielded: semiconductors were excluded from recent tariff rounds, a move widely seen as an effort to preserve AI-driven investment momentum.
“All the investment around AI is fueling secondary growth in areas like data center construction,” Kuhanathan said. “Residential construction remains weak, but commercial construction tied to AI infrastructure is clearly benefiting.”
However, Kuhanathan cautioned against too much optimism over AI investment. "One of the big challenges is that some companies that don't see yet the return on investment on AI," he said. "Most of the revenues are not coming from individual people, but companies that are investing because they believe that they can gain productivity and automate tasks. So, if it ends up a disappointment, some companies might scale back (investment)."
Looking ahead to 2026, Kuhanathan also sees potential rebounds in battered European auto firms and stabilization in the energy sector if geopolitical risks ease. “If we saw a de-escalation of the war in Ukraine, that would be very positive for European utilities,” he noted.
One striking trend from Allianz Trade’s analysis is the rerouting of imports. In July, more than 60% of Chinese goods entering the US were shipped via India or ASEAN countries. While this helps blunt direct tariff exposure, it also carries long-term risks.
“Bypassing tariffs through third countries may work short-term, but if the administration changes the rules – shifting origin criteria or applying punitive tariffs retroactively – companies will face both higher logistics costs and painful one-off duty bills," Kuhanathan warned.
Relocating supply chains entirely presents its own challenges, including upfront investment, operational risk associated with untested suppliers, and lengthy adjustment periods.
For now, businesses face a world where resilience requires agility. “Companies can’t count on tariffs remaining static,” Kuhanathan said. “Whether through rerouting, relocating, or simply absorbing higher costs, every option comes with trade-offs. The key is to stay policy-aware and flexible.”
