Some Australian investors may be worried about what Donald Trump's tariffs on China and other countries could mean for global economic growth in the short term. I think certain ASX shares could be suitable defensive choices for those concerned investors.
More pain for the Chinese economy caused by the United States president's tariffs could be problematic for Australia because China is one of our most important trading partners.
For starters, the Asian superpower buys huge quantities of resources from companies like BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), and Fortescue Ltd (ASX: FMG). Less demand would hit the overall share market. The Australian federal budget also gets a fair chunk of revenue from resources.
A weaker Australian (or Chinese) economy could be bad news for some ASX shares that are exposed to resource prices or discretionary spending. With that in mind, I'm going to mention three businesses that could offer defensive earnings in the coming years.
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Charter Hall Long WALE REIT (ASX: CLW)
This real estate investment trust (REIT) owns various types of commercial property, including telecommunications exchanges, service stations, pubs and bottle shops, industrial buildings, and so on.
One of the most attractive things about this business is its long weighted average lease expiry (WALE). This means the tenants are signed on for a long time, giving income visibility and stability. At the end of December 2024, the CLW REIT had a WALE of 9.7 years.
The business's annual rental growth is either fixed or linked to inflation, providing steady growth for its overall rental profitability. In the FY25 first-half result, it achieved 3.5% like-for-like net property income (NPI) growth.
Regardless of tariffs, companies still need to occupy buildings for their operations, and this REIT provides appealing property diversification.
It's expecting to pay a distribution of 25 cents per unit in FY25, which currently translates into a distribution yield of 6.5%.
Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare provides pathology services in several countries, including Australia, the United Kingdom, Germany, Switzerland, and the US.
I think this ASX healthcare share is attractive because healthcare has very consistent demand each year – people don't choose when they're going to be sick or require pathology services.
The company's FY25 update showed how resilient it is amid challenging economic conditions. In the first four months to October 2024, it reported total revenue growth of 10%, with organic revenue growth of more than 5% and operating profit (EBITDA) growth of more than 10%. I'm not expecting this business to be affected by Trump's tariffs.
The company expects to grow its EBITDA by at least 10% in FY25, which could help fund yet another dividend increase. It has increased its dividend each year in the past decade and has a trailing dividend yield of 3.75%.
Telstra Group Ltd (ASX: TLS)
Telstra is Australia's largest telecommunications business, with the biggest subscriber base and widest network coverage.
The steady addition of new subscribers to its mobile division is helping increase margins because it spreads the network's fixed costs across more users.
The ASX telco share could continue growing in importance to the Australian economy as the country becomes increasingly digitalised.
I believe demand for the company's service will remain resilient even if the economy becomes more challenged. An internet connection seems like an essential utility for households and businesses.
The business currently has a grossed-up dividend yield of 6.5%, including franking credits, which I believe is likely to be a resilient payout.
