Hot Money Monday: Like goldies, these small cap utilities might just benefit from tariffs

Trump’s tariffs are shaking things up worldwide, but small-cap Aussie utilities might just sail through and even come out ahead.

Small cap ASX utilities could be a safe haven. Picture via Getty Images

• Trump's tariffs are causing global chaos, however…

• … some sectors stay strong and could even thrive

• Small cap ASX utilities could be something of a safe haven

As the world grapples with the fallout from Trump’s tariffs, Australia has managed to avoid the worst of the impact.

But while we're not in the direct line of fire, the ripple effects of Trump’s policies still have the potential to stir things up for our economy.

Tariffs can hit Australia’s economy in two ways.

First, the direct hit, where Australia’s goods sold to the US become more expensive and less competitive, like beef for instance. If those tariffs stay in place, fewer Americans might buy Aussie beef.

But the blow to Australia’s GDP from that is probably going to be pretty small. Why? Because while the US is important, they’re not our biggest trading partner – China is.

In 2023-2024, Aussie exports to the US were worth about $37.5 billion, or just 6% of all our exports, while China accounts for a mammoth 32% or $212.6 billion.

Source: ABC

Beef is the biggest seller to the US, pulling in about $3 billion a year.

Source: ABC

The second type is the indirect hit: a slowdown in China would ripple through and dent demand for commodities that Australia exports heavily, like iron ore and coal.

Sectors most shielded from tariffs

For investors looking to navigate these choppy waters, some areas will be less exposed to the chaos, and others might even thrive.

Take a look at our mining giants, for example.

While Australia's two biggest exports – iron ore and coal – are feeling the heat from a slower Chinese economy, there’s one bright spot that investors can turn to: gold.

Gold is our fourth-largest export product, just behind natural gas.

The increase in global uncertainty is driving investors toward safe havens. While gold will be affected by the baseline 10% US tariff, Australian gold miners are well positioned to benefit.

Meanwhile for companies like BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG), the story is more mixed.

A slowdown in demand for iron ore, particularly from China, could take a toll, though if China turns to stimulus measures to prop up its economy, we might see a boost in demand for Aussie commodities.

Elsewhere, winners from the ongoing trade war could be domestic-focused goods and service companies.

“Consumer staples and retailers, telcos and utilities are best placed given they earn decent returns on capital and are cash generative, “said a note from John Birkhold at TWC Invest.

Interest rate sensitive industries might also benefit if “the tariff regime leads to a global suppression of animal spirits, and a slow down or even recession in major economies”, added Birkhold.

In the telco space, things are also looking a little calmer.

Companies like Telstra (ASX:TLS) and TPG Telecom (ASX:TPM) aren’t feeling the brunt of the tariffs because their revenues are largely domestic. This sector is, therefore, relatively shielded.

For Aussie retailers, the situation is more nuanced. Some may even find themselves in a stronger position.

With the US imposing tariffs on goods from China, there’s potential for an oversupply of Chinese goods, which could push costs down globally for Aussie retailers. This also means Australian consumers could benefit from lower prices.

Consumer defensive stocks – like supermarkets and liquor retailers – are a more reliable play.

According to a note from Morningstar, companies such as Woolworths (ASX:WOW) and Endeavour Group (ASX:EDV) are almost entirely focused on the Australian market, so they’re largely untouched by the tariffs.

Energy stocks, too, seem to be mostly insulated.

“Barring an adverse impact on the global economy overall and indirectly energy prices, we see limited tariff consequences for Australian energy names.”

Utilities could be another big winner

Meanwhile, there is one sector that tends to stand firm when the markets are shaken ... utilities.

These companies, responsible for providing the basic services we rely on – electricity, gas, and water – offer a sense of stability that’s hard to find elsewhere in times of volatility.

For Aussie investors, utilities are like the calm in the eye of a storm.

Whether the economy is booming or slumping, Aussies still need power to light their homes, gas to cook their meals and water to get through the day.

According to Morningstar, AGL Energy (ASX:AGL), Origin Energy (ASX:ORG), and Spark Infrastructure Group (ASX:SKI) are in a good spot to handle the tariff storm because they focus mainly on the Aussie market.

Even if global demand for energy drops, there’s a bright side. Lower energy demand could push wholesale prices down, helping cut costs.

Plus, tariffs might give Australian utilities a chance to score cheaper imports, especially from China looking for new buyers.

“Cheaper imports from China, as it looks for new markets, could reduce the cost of planned wind farms, solar farms, and large-scale batteries,” Morningstar noted.

And finally, because utilities are heavily regulated, they tend to have long-term contracts and a stable revenue stream, which makes them much less susceptible to the wild swings in demand that can affect other industries.

Small cap utilities on the ASX

While many investors associate utility stocks with larger players, there are also plenty of opportunities in the small-cap space.

These are lesser-known companies that can potentially offer attractive growth potential.

Security	Description	Last	%Mth	%SixMth	%Yr	MarketCap
VPR	Volt Group	0.002	0%	0%	50%	$16,074,312
TPC	TPC Consolidated Ltd	9.030	9%	-7%	-21%	$102,425,999
TML	Timah Resources Ltd	0.041	0%	-13%	0%	$3,639,150
LPE	Locality Planning	0.105	-16%	-22%	94%	$19,130,082
LGI	Lgilimited	2.590	-12%	-11%	-1%	$230,014,717
KPO	Kalina Power Limited	0.005	-38%	-62%	27%	$14,443,719
FHE	Frontier Energy Ltd	0.145	38%	12%	-57%	$74,684,793
FLC	Fluence Corporation	0.044	-30%	-51%	-74%	$47,562,522
EWC	Energy World Corpor.	0.014	-30%	40%	8%	$43,104,897
D2O	Duxton Water Ltd	1.355	0%	-4%	-9%	$211,926,270
DEL	Delorean Corporation	0.140	0%	0%	137%	$30,838,941
DEM	De.Mem Ltd	0.091	-21%	-33%	-33%	$26,654,207
CCE	Carnegie Cln Energy	0.036	0%	-8%	-35%	$13,183,325

Volt Power Group (ASX:VPR)

Volt is an Aussie industrial tech company focused on zero-emission power, clean hydrogen production, and advanced mining equipment.

It owns and develops several key technologies, including ATEN – which turns waste heat into electricity – and HYTEN, which produces clean hydrogen from the same heat source.

It also owns Wescone, a long-standing name in ore crushing tech, and EcoQuip, which builds high-spec mobile solar lighting and comms towers.

Volt is fully in control of all its tech and is pushing ahead with commercialisation.

It's also on the lookout for more clean energy and industrial solutions to grow its footprint.

TPC Consolidated (ASX:TPC)

TPC is the owner and operator of CovaU, a well-established Australian electricity and gas retailer serving both residential and business customers.

Since launching in 2014, CovaU has steadily grown its presence across most Australian states and territories, offering a broad range of energy products, from standard gas and electricity to solar and GreenPower plans.

TPC is now focused on expanding CovaU’s footprint in the energy sector, with a particular emphasis on renewable and low-emission energy solutions.

Locality Planning Energy (ASX:LPE)

LPE, formerly Stratum Metals, is an energy provider working in embedded networks, mainly in Queensland and Northern NSW.

It supplies electricity, hot water, solar, and battery systems to both homes and businesses.

It manages everything from setup to running the systems, including the money side of things. That makes it useful for developers, body corporates, and communities who want a full service.

Right now, it’s focusing onbringing in smart meters, cleaning up its billing process, and updating contracts.

It's also looking to grow its reach and lock in steady income through long-term supply deals.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.

Originally published as Hot Money Monday: Like goldies, these small cap utilities might just benefit from tariffs