3 Stocks That Could Be Most Vulnerable to Tariffs

If there's one word that will probably summarize 2025 for investors, it's tariffs. The U.S. government has applied tariff rates globally, and it has increased, changed, and also made exceptions to them. Trying to navigate all these developments hasn't been easy for investors, to say the least.

Three stocks that may be particularly vulnerable to tariffs are Constellation Brands (NYSE: STZ), PDD Holdings (NASDAQ: PDD), and e.l.f. Beauty (NYSE: ELF), all of which are facing some considerable headwinds. Here's why you may want to think twice about holding them in your portfolio right now.

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1. Constellation Brands

Beer maker Constellation Brands makes all of its beer in Mexico, and that's a problem, as the U.S. has imposed 25% tariffs on imported canned beer, which will weigh on Constellation's profitability. It may potentially also result in higher prices, hurting overall demand in the process.

The company projects between a 2% decline and 1% growth for the current fiscal year. And its comparable earnings per share forecast is between $12.60 to $12.90 -- more than a dollar lower than the $13.97 that Wall Street analysts were expecting.

At 13 times estimated future profits, Constellation is a stock that looks cheap. But the problem is, with the tariff situation seemingly changing each week, it'll be hard for analysts to have a good grasp as to what Constellation's earnings may look like in the year ahead.

There's considerable risk facing Constellation in the near term. While the company may end up recovering in the long run, unless you're willing to be extremely patient amid what could be a bumpy ride for the business and the stock, you may be better off taking a wait-and-see approach with Constellation than adding it to your portfolio.

2. PDD Holdings

One stock that has surprised me this year is PDD Holdings, and that's because it isn't in a free fall, at least not yet. President Donald Trump has been aggressively targeting China with tariffs, which can make PDD Holdings, which owns Chinese online retail giant Temu, particularly vulnerable.

Next month, the government plans to close a loophole that Temu and other online retailers have been taking advantage of, known as "de minimis," which allowed packages worth less than $800 to enter the U.S. without facing duties. That change could have a devastating impact on Temu's growth potential, as low-priced goods on its marketplace may soon become much more expensive for U.S. consumers.

If PDD's growth rate stalls in relation to this, which likely will be the case, the stock could be due for a significant sell-off. Last year, the company reported $54 billion in sales, which rose by 59% year over year, with Temu being a big part of that growth. The stock trades at a seemingly cheap forward price-to-earnings (P/E) multiple of 7, but even that may not be enough to save PDD shares from falling further, as its earnings could deteriorate in future quarters.

3. e.l.f. Beauty

Another company with high exposure to China is e.l.f. Beauty, known for its affordable, low-priced cosmetics. Entering trading this week, its shares are down more than 55% since the start of the year, as investors have already been hitting the panic button on the cosmetics stock.

As much as 80% of the company's cosmetics are made in China, which means a trade war involving the country would be devastating to its bottom line. Last week, Trump raised the tariff rate on Chinese imports to 145% after China retaliated with its own tariffs. With the situation changing often, it makes e.l.f. Beauty a potentially volatile stock to hold.

While it also looks cheap, trading at a forward P/E of 14, it would be nearly impossible for analysts to accurately estimate the company's earnings, given how quickly the trade war with China has been escalating; investors shouldn't take too much comfort in that low multiple.

The ultimate takeaway from this: Only hang on to e.l.f. Beauty stock if you can stomach the volatility and aren't in a rush to sell, because it may be a long and challenging road ahead.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends e.l.f. Beauty. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.