Businesses Brace for Profit Dips and Uncertainty following tense US Tariff Implementations
The ongoing trade war initiated by US President Donald Trump is leaving a trail of chaos in its wake, as companies all over the globe are feeling the brunt. This week, General Motors, Volvo Cars, Adidas, Porsche, Electrolux, and many others have all been impacted in various ways.
Tuesday was a tough day for these corporations as they reported negative earnings and cut their full-year outlooks. GM's CFO Paul Jacobson admitted that trade policies could have a significant impact on the company and urged consumers to remain cautious, while Porsche is estimated to have lost at least €100 million from US tariffs in April and May.
Adidas' CEO, Bjorn Gulden, admitted that the company would have upgraded its revenue and profit guidance in a normal world, but tariff uncertainty has forced them to hold off on such decisions. Meanwhile, Volvo Cars announced plans for spending cuts of about $1.8 billion and restructuring its US operations as its first-quarter profit sharply dropped.
Consumer sentiment appears to be at the mercy of this trade war. Electrolux, the Swedish appliances maker, has reported weaker consumer sentiment as it lowered its North America market outlook for the year. Carlsberg's CEO, Jacob Aarup-Andersen, has echoed this sentiment and explained that prolonged uncertainty will impact consumers' purchasing decisions.
HSBC warned that the global trade war could hit loan demand and credit quality, marking the clearest warning yet from a major bank. Other companies, like MTU Aero Engines, are taking measures to mitigate the impact of tariffs estimated to be in the mid-to-high double-digit million euros range this year.
It's clear that the trade war is creating a bifurcated landscape. Domestically focused firms encounter fewer direct risks, while internationally exposed companies grapple with margin compression and earnings volatility. As this crisis unfolds, the corporate world stands on shaky ground, and it's difficult to predict what the future holds.
(This report is not edited by our staff and is auto-generated from a syndicated feed.)
Insights:
- Apart from the companies mentioned, other sectors such as airlines (Delta) and tech (Logitech) have also revised their earnings guidance due to tariff-related uncertainty.
- Firms with significant US market exposure, particularly in manufacturing, face higher costs and demand volatility. Service-oriented businesses, on the other hand, may remain relatively insulated from these impacts.
- The US trade war is projected to reduce US GDP by 1.0% and household after-tax income by 1.2%, compounding challenges for consumer-driven industries.
- The trade war has led to a polarized situation where firms focusing primarily on the domestic market face fewer direct risks, while internationally exposed companies are grappling with margin erosion and earnings volatility.
- Porsche, like many other companies, has warned that tariffs imposed due to the ongoing trade war could lead to significant financial losses, such as the estimated €100 million lost in April and May.
- Apart from Porsche, other sectors such as airlines (Delta) and tech (Logitech) have also been impacted by tariff-related uncertainty and have revised their earnings guidance accordingly.
- In the long-term outlook, the trade war is projected to create a disparate business environment, with firms focusing on domestic markets facing fewer direct risks compared to those with significant international exposure, who are currently grappling with margin compression and earnings volatility.
