Amidst the turmoil caused by Trump's reciprocal tariffs on the markets, investors are finding hope in fast-food stocks, particularly McDonald's, Yum! Brands, and Restaurant Brands International. On Thursday, while the broader market saw a decline of nearly 5%, the shares of these fast-food giants surged by 2% for McDonald's and 2% for Yum (which includes brands like KFC, Pizza Hut, and Taco Bell), and 1.4% for Restaurant Brands International (which operates Burger King, Tim Hortons, and Popeyes).

The escalating tariff situation has led investors to seek refuge in fast food chains as they aim to shield their investments from tariff risks and uncertainties. The analyst at BTIG, Peter Saleh, highlighted that most products offered by these chains are domestically sourced, with only a small percentage of items like produce, beef, and wheat being imported from countries like Canada and Mexico.

Starting April 5, all imports will be subjected to a 10% tariff, with higher rates for about 60 countries from April 9 onwards. China is facing a 34% reciprocal tariff on top of the existing 20%, amounting to a total of 54%. However, goods compliant with the US-Canada-Mexico agreement (USMCA) are exempt from duties, offering relief to the food industry. The franchise model followed by fast-food giants provides them with an advantage over fast-casual restaurants like Chipotle, Cava, Sweetgreen, and Shake Shack, which have experienced declines in their share prices.

Despite expectations that McDonald's and Yum! Brands may demonstrate more resilience during periods of consumer belt-tightening, analysts like Saleh caution against overvaluing these stocks due to lackluster earnings growth. Efforts by these companies to compete on value, such as increasing value offerings, might impact their profitability. The CEO of the Food Away From Home Association, Phil Kafarakis, voiced concerns that the additional tariffs could prompt another round of pricing assessments in the food industry.