Over the past few weeks, investor fears of rising interest rates and inflationary pressures have taken a back seat to the escalating trade tensions between the U.S. and China.

While any shift in public policy typically roils the stock market, all nations involved understand that an actual trade war can easily result in higher input prices for consumers, slower economic growth and, ultimately, political backlash at the voting booth. So it is no coincidence that China is targeting products such as soybeans (produced in the red states of Iowa and Indiana), whiskey (produced in Kentucky) and orange juice (produced in the swing state of Florida).

Likewise, President Donald Trump is targeting jobs-heavy industries such as auto parts, steel and industrial equipment, which the Chinese government needs to keep millions of people employed.

The ideal system of trade theoretically involves a transactional process where each country exports products that they naturally produce, for example: the U.S. in agriculture, technology and natural gas; Europe in industrial goods; or Australia in steel and aluminum.

It is common practice, however, for businesses around the world to contribute to the campaigns of elected officials in order to effectuate trade barriers and, therefore, lessen competition for their domestically produced goods. In the end, consumers receive less choice and higher prices. If these distortions become extreme, voter backlash could become inevitable, so politicians are likely to walk a very fine line behind the scenes.

As trade discussions continue to unfold, two U.S. sectors will likely be net-beneficiaries of these talks: technology and energy.

Look to an ETF for technology stocks. According to Bloomberg, 77 percent of the global technology sector market cap consists of U.S. companies, followed by Japan at 4 percent, South Korea at 3.8 percent and China at 3.5 percent. The overwhelming value is created by U.S. technology companies, so it is no wonder that China has not imposed tariffs on our technology goods. Countries such as China often demand the transfer of intellectual property before foreign companies can tap into their vast consumer base, especially for leading-edge technologies such as 5G, semiconductors and productivity software. This distortion results in less income for U.S. companies from these foreign countries and, ultimately, a wider trade deficit.

If Chinese consumers had full access to Alphabet’s (ticker: GOOG, GOOGL) Google search engine, for example, advertisers would benefit from lower ad rates and consumers would benefit from less biased search results.

It is notable that Google generates $52 billion in revenue from the U.S. and $36 billion from Europe, but only $16 billion from Asia, even though half of the world lives in Asia. The Chinese search market is estimated at $73 billion a year, so a 10 percent swing in market share to Google could meaningfully impact the $600 billion U.S. trade deficit. According to State Street, the Technology Select SPDR ETF (XLK) is trading at a 2018 price-earnings ratio of 18.5 and the three- to five-year EPS growth is projected at 13.5 percent per year. Any incremental access for U.S. tech companies to China will likely accelerate this projected growth rate.

The U.S. is a big player in natural gas production. In the global energy landscape, the U.S. is a surprisingly significant player. According to the BP 2017 Statistical Review of World Energy, the U.S. accounted for 22 percent of global natural gas consumption in 2016, versus 6 percent for China. However, the U.S. accounted for 9.5 percent of global coal consumption versus 51 percent for China that same year, so it is clear why China has such widespread air pollution.

In terms of natural gas production, the U.S. produced 22 percent of the world’s supply, and China produced 4 percent, or only 67 percent of its consumption, with the balance imported. China’s natural gas demand has grown at 10 percent per year, so it will increasingly need to import more to fulfill its needs.

Also notable is how dependent Europe and Asia are on the Middle East and Russia for their natural gas needs. U.S. exports of natural gas could help reduce trade imbalances and diversify the supplier base for these countries, especially considering the growing coordination of energy production between OPEC and Russia. The U.S. is especially dominant in biofuels, a renewable resource which could move the needle for Asia’s growing air pollution problem. The U.S. produces 44 percent of the world’s biofuels compared to China’s 25 percent. This is another area where China could easily help itself and the American farmer through increased reliance on biofuels.

While China has imposed a tariff on U.S. soybeans, the reality is that few countries have the spare capacity to meet their own internal energy needs and China’s growing demand. According to State Street, the Energy Select SPDR ETF (XLE) is trading at 18.7 times 2018 earnings and earnings are projected to grow 22 percent a year for the next three to five years. The earnings upside projections for this sector would be more significant if China’s incremental demand for U.S. energy results in higher export volumes, which, in-turn, leads to higher commodity prices.

Moving forward. While trade wars can certainly shift consumer sentiment and raise alarm bells for investors, the entirety of the economy will not suffer if a trade war with China escalates.

Energy and technology remain likely to benefit in trade talks as tensions continue rise, and investors would do well to turn their attention toward these sectors in the coming weeks.

Disclosure: Leslie Thompson and clients of Spectrum Management Group own shares of theTechnology Select Sector SPDR ETF, the Energy Select Sector SPDR ETF and Alphabet stock.

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