Barclays told clients the border adjustment tax (BAT) proposal in President Donald Trump's and the GOP's tax reform plan will have significant ramifications on corporate earnings across sectors.
The firm shared which companies will benefit or lose if the tax passes, according to its analysis.
"As investors await the details for the proposed tax plan, President Trump has made it clear that protectionism is a key tenet of his administration," strategist Keith Parker wrote in a note to clients Thursday. "Overall, we see BAT as a low probability but potentially very high impact event, though politics are fluid and plan details/possibilities will shift."
BAT is a part of the House Republicans' current tax reform proposal. It aims to generate funds to offset a large corporate tax rate reduction by taxing imports.
The strategist said the GOP plan to reduce corporate tax rates to 20 percent from 35 percent will boost S&P 500 earnings by 12 percentage points, but the implementation of the BAT will detract 6 percentage points from the lower tax rate benefit.
In terms of sectors, Parker said the BAT would hurt retail, food, staples, consumer goods, autos and communication equipment companies. On the flip side, capital goods, defense, materials and chemical names will do relatively better due to their higher levels of domestic production.
For investors who want to trade the prospect of the BAT being implemented, here are five companies Barclays says will benefit from the proposal.