How an end of the Trump tariffs could sink Telstra shares

Telstra Group Ltd (ASX: TLS) shares are charging higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) telco closed yesterday trading for $4.56. In late morning trade on Tuesday, shares are changing hands for $4.63 apiece, up 1.5%.

For some context, the ASX 200 is up 0.8% at this same time.

Today's outperformance is par for the course for Telstra shares this past year. The ASX 200 telco stock is up 26.3% over 12 months, racing ahead of the 6.3% gains posted by the benchmark index.

And that doesn't include the 18.5 cents a share in fully franked dividends Telstra has paid out over the year. This sees the stock trading on a 4.0% trailing dividend yield.

Looking ahead, however, Seneca Financial Solutions' Arthur Garipoli believes storm clouds could be forming for Telstra (courtesy of The Bull).

Here's why.

Trump's trade negotiations could spell trouble for Telstra shares

"The share price of this telecommunications giant has enjoyed a strong run in the past 12 months," said Garipoli, who has a sell recommendation on Telstra shares. "The shares have risen from $3.69 on May 16, 2024, to trade at $4.485 on May 15, 2025."

Drilling into why he foresees potential headwinds building for further outperformance, Garipoli said:

Telstra is a defensive stock that's benefited from the market turmoil following the Trump Administration's introduction of steep tariffs on April 2. Investors concluded that TLS would be insulated from the trade war.

Indeed, a look at the price charts shows us that the ASX 200 dropped 7.1% between 2 April and 9 April, as investors scrambled to sort out the ramifications of the sweeping Trump tariffs.

Telstra shares, on the other hand, gained 0.5% over this same time.

But with a potential lasting trade deal between the United States and China now on the horizon to avert a trade war, Garipoli cautions that Telstra's defensive appeal could diminish.

He noted:

However, moving forward, investors may switch out of defensive plays if it becomes apparent the 90-day suspension on the steepest tariffs between China and the US will be extended, or a mutually favourable outcome between the two countries is negotiated.

Garipoli concluded, "Given the uncertainty, Telstra investors may want to consider taking advantage of the higher price by locking in some gains."

What's the latest from the ASX 200 telco?

The last price-sensitive news to directly impact Telstra shares was the company's half-year results, released on 20 February.

Highlights included a 0.9% year-on-year increase in total income to $11.82 billion. And on the bottom line, the ASX 200 telco's half-year profit after tax was up 7.1% to $1.1 billion.

Management also boosted the fully franked interim dividend by 5.6% to 9.5 cents per share.

Telstra shares closed up 5.6% on the day of the results release.

The post How an end of the Trump tariffs could sink Telstra shares appeared first on The Motley Fool Australia.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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