Why Lowe's, Kohl's, and Stanley Black & Decker Stocks All Popped This Morning

Monday dawned bright for investors after President Donald Trump announced over the weekend that the U.S. has struck a deal with China to dramatically -- if temporarily -- roll back some of the tidal wave of new tariffs that the two nations had imposed on each other over the past several weeks. The U.S. and China agreed to a 90-day pause on post-April 2 tariffs, which will reduce the tariff rate on imported Chinese goods to 30%, and on exported U.S. goods to 10%.

Major U.S. importers of China-made wares rejoiced, and shares of their stocks popped. As of 9:45 a.m. ET, hardware store chain Lowe's Companies is up 4.6%, tool-maker Stanley Black & Decker (NYSE: SWK) is up 14.6%, and department store chain Kohl's Corp. (NYSE: KSS) is a bit in between, up 12.4%.

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Today in tariffs news

Is it just me, or does every move in the stock market lately seem to depend on which way tariff rates are headed? (Hint: It's not just me.)

If you are trying to make heads or tails of the situation, here's another hint, courtesy of Treasury Secretary Scott Bessent. Explaining the decision to flip-flop on roughly four-fifths of the tariffs the administration put in place barely a month ago this morning, Bessent said that the big-picture goal of all this tariffs shuffling is "decoupling" the U.S. economy from China -- but only to an extent. "We do not want a generalized decoupling from China," said Bessent in an interview with CNBC. "What we do want is a decoupling for strategic necessities, which we were unable to obtain during COVID and we realized that efficient supply chains were not resilient supply chains."

It probably remains to be seen precisely which Chinese goods the U.S. will end up deeming "strategic" such that we want to ensure they're made in the USA, and not imported abroad. But cheap, labor-intensive everyday consumer goods such as you shop for every week from stores like Lowe's and Kohl's? Those seem to be fine, and the administration isn't going to shut off trade in those items entirely (as a 145% tariff rate would have ensured). Instead, a more moderate 30% rate will suffice.

Assuming I'm reading these tea leaves correctly, therefore, it would seem that investors over-read the risk of tariffs on low-tech imports remaining permanent, and perhaps sold off stocks dependent on such imports too much -- because they were never going to remain super-high permanently. This would therefore also suggest that investors' enthusiasm over today's news, for these three stocks at least, is justified.

Is it safe to buy Lowe's, Kohl's, and Stanley Black & Decker stocks now?

That said, I could easily be wrong about this -- and China does, after all, have its own say in how the tariff situation develops. Tariffs that got rolled back over last weekend could easily reappear next weekend. In that regard, here are a few facts and figures to keep in mind:

Lowe's currently imports about 40% of the goods it sells in its stores. Much (but we don't know precisely how much) of that is from China.

Stanley Black & Decker imports $1 billion in goods annually from China, and another $1.3 billion from Mexico -- which is another at-tariffs-risk market you should keep your eye on. Those two countries alone therefore account for at least 15% of the company's sales, according to data from S&P Global Market Intelligence.

Kohl's, meanwhile, was reported to be importing about 20% of its wares from China at the time of the last Trump administration. It's not clear exactly where that percentage lies today, but 20% is probably a good ballpark.

So all three stocks remain significantly (but not entirely) affected by the progress of China-U.S. tariff negotiations. More broadly, they're all going to be even more dependent upon progress in tariffs negotiations globally, as imports that they used to get from China, but now source from other international manufacturers, will still be affected by tariff rates from their new sources.

Long story short, just because the president has called a temporary truce with China doesn't mean you can let your guard down now, or stop reading the news. There's still tariffs risk in all three stocks, despite what today's rally might suggest.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.