Tariff news continue to dominate the 24-hour news cycle, and the latest deal struck with the U.S. and Japan should ease any potential investor anxiety over the robotics industry. Though tariff clouds were present, it never really dimmed the sunny outlook for the industry as a whole.
15% Japan Tariffs = 100% Win for Robotics
Japan has always been in the forefront of burgeoning technology, and in the case of robotics, this certainly holds true. Initial threats of tariffs at 45% for U.S. importers dropped by 30% to now a 15% reciprocal tariff on Japanese goods brought to the U.S.
VettaFi Senior Research Analyst Zeno Mercer had the foresight to know back in April that the proposals wouldn’t end with those initial high levels.
“These tariffs aren’t going to land anywhere near the initial proposals because these Japanese robotics companies and automation players like Fanuc and Harmonic Drive have been investing heavily in the U.S. in the last five years,” Mercer said.
Speeding Through Tariff Bumps
Much like the rest of the market, the robotics industry has been recovering from April’s tariff tantrum, speeding through any proverbial speed bumps it may have caused. The ROBO Global Robotics and Automation Index certainly bounced back after its plunge in April, as seen through the performance of the Robo Global Robotics and Automation Index ETF (ROBO). The fund is up close to 12% for the year, following the V-shaped trend that’s been seen in the broader markets, notably the S&P 500. Given its current trajectory, that V-shape could easily turn into a checkmark.
“Long story short, I think the fears of what could happen to robotics and the automation space (as a result of tariffs) have disappeared,” Mercer said. He added that tariffs haven’t had a profound impact on inducing gloomier outlooks for robotics companies when announcing their latest earnings.
Japanese Constituents Rose Higher
ROBO punctuates country diversification with exposure to companies in various parts of the globe. Investors can capture game-changing innovation not only in the U.S., to which the majority of ROBO tilts (39%), but also in Japan, which carries the second-highest country allocation in the index (almost 20%).
Following the U.S.-Japan tariff deal, robotics companies primarily domiciled in Japan saw a nice jump. Yaskawa Electric ended last week up 12.9%. Fanuc Corp and Harmonic Drive, the aforementioned companies Mercer noted, were up 11.4% and 12.7%, respectively.
ROBO: Automated Diversification
ROBO uses a modified equal-weight approach, allowing prospective robotics investors to eschew the overconcentration risk of individual stocks. Why invest in a few companies and expose a portfolio to a greater degree of volatility in one or a few names when investors can get exposure to the whole industry? ROBO can do just that.
ROBO is an ideal ingress for investors looking to capture the growth potential of an industry that isn’t going to slow down anytime soon or even later — here in the U.S. and the rest of the world.
“There’s still a lot of runway for robotics,” Mercer said.
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ROBO is the underlying index for the ROBO Global Robotics & Automation ETF (ROBO), the L&G ROBO Global Robotics and Automation UCITS ETF (ROBO.LN), and the Global X ROBO Global Robotics & Automation ETF (ROBO.AU).
VettaFi is the index provider for the ROBO ETFs, for which it receives an index licensing fee. However, the ROBO ETFs are not issued, sponsored, endorsed, or sold by VettaFi. VettaFi and its affiliates have no obligation or liability in connection with the issuance, administration, marketing, or trading of the ROBO ETFs.
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