[SAN FRANCISCO] From Apple to General Motors (GM), corporate America is bracing for tens of billions of US dollars in damages from Trump’s trade war – and that’s before most affected goods have landed.
Among US companies that have disclosed financial projections so far, GM sees a US$5 billion hit this year, while Apple expects US$900 million in higher costs in the current quarter. Nvidia is taking a US$5.5 billion charge to account for new export controls.
US President Donald Trump’s administration imposed across-the-board tariffs on most imports and targeted some countries and industries for additional levies. Duties are as high as 145 per cent on many Chinese imports, and Beijing retaliated with import taxes of 125 per cent on American goods. Foreign-made steel and aluminium also face a 25 per cent US tariff.
The pre-emptive warnings from these and other blue chips may vastly underestimate the overall hit to bottom lines. Many companies have yet to provide guidance, with some taking a wait-and-see approach. Others have foreshadowed the pain by widening expense ranges, pulling their full-year outlooks or warning price hikes will erode consumer demand.
Meta Platforms, for instance, lifted its capital spending projection for the year by as much as US$7 billion, blaming the change in part on higher-than-expected costs for globally sourced equipment.
“There’s just a lot of uncertainty around this given the ongoing trade discussions,” Susan Li, chief financial officer of the owner of Facebook and Instagram, said on a call with analysts.
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The word “uncertainty” has become a go-to descriptor for many executives during quarterly financial results calls. The u-word has cropped up more than 9,000 times so far in those corporate calls this season – more than when it last peaked, at the start of the Covid-19 pandemic, and the highest mentions recorded in Bloomberg data.
Dozens of companies have yet to report their latest earnings and answer analyst questions about the blow from tariffs, including Nvidia, Oracle, Home Depot and Walmart. Some industries, such as online advertising, will likely be impacted later in the year, and only if businesses cut their budgets to offset ongoing elevated costs or lower consumer demand.
Corporate managers are responding in a multitude of ways, including making attempts to shift production out of China and front-load material orders ahead of anticipated price hikes.
Microsoft said sales of its Windows software and other products rose faster than expected as customers stocked up on inventory. Amazon.com accelerated some inventory purchases in the first quarter ahead of anticipated tariffs. Combined with unrelated costs associated with customer returns, the move lowered its profitability during the first quarter by roughly US$1 billion.
“Obviously, none of us knows exactly where tariffs will settle or when,” Andy Jassy, Amazon’s chief executive officer, told analysts on a conference call.
Import models
GM, which imports vehicles from South Korea, Canada and Mexico, is among the biggest losers so far in Corporate America. The Detroit-based company and other carmakers are among the hardest hit, with a 25 per cent duty on most imported vehicles. Separate duties on imported parts also are taking a toll on vehicles built at US auto plants.
Rival Ford Motor, which domestically produces 80 per cent of the cars it sells in the US, said on May 5 that it sees the duties reducing earnings before interest and taxes by about US$1.5 billion this year. And motorcycle maker Harley-Davidson estimates tariffs could cost it as much as US$175 million this year.
It’s not just American carmakers. Japan’s Toyota Motor said on Thursday (May 8) that US tariffs will cut its operating income by US$1.3 billion in just the first two months since Apr 2, which Trump called his trade “Liberation Day.”
Other manufacturers are similarly feeling the pinch on profits from tariffs. Procter & Gamble (P&G) estimated current and proposed levies could add US$1 billion to US$1.5 billion to its annual costs. The consumer goods giant plans to counter that in part by raising prices on its products.
“It’s not immaterial,” P&G CFO Andre Schulten said on a Apr 24 earnings call with analysts.
Stanley Black & Decker, which makes power tools and lawnmowers, estimated a gross tariff impact of US$1.7 billion on an annualised basis. Even with supply-chain tweaks and price increases to lessen the blow, the company still expects a roughly 15 per cent haircut to its earnings this year. That’s assuming that sticker shock does not curb demand beyond the point at which the company can contain the damage through cost cuts.
“Price increases will be necessary in the US market due to the current tariffs, and we have implemented a substantial increase in April,” Stanley CEO Donald Allan told analysts on an Apr 30 conference call. He added the company has “notified our customers that further price action is likely required if existing tariffs stay at current levels.”
Industrial impact
Aerospace and defence giant RTX said on Apr 22 that it’s bracing for a US$850 million blow to operating profits, even with mitigation efforts. Honeywell International, GE HealthCare Technologies and GE Aerospace each project a 2025 hit from tariffs on the order of US$500 million before accounting for supply-chain changes and price increases.
Boeing expects tariffs to increase its manufacturing costs by less than US$500 million annually, including a 10 per cent duty assessed on large components of its 787 Dreamliner that are made in Japan and Italy. The fallout could worsen if the European Union joins China in imposing reciprocal tariffs that make Boeing’s planes prohibitively expensive for local buyers.
3M told investors Apr 22 that tariffs would cost it as much as US$850 million a year – but only if it took no steps to blunt the impact. The diversified industrial product manufacturer said planned countermeasures will cut its earnings exposure this year to less than half that amount.
Danaher, which makes life sciences and diagnostics equipment, told analysts on a Apr 22 call that a projected US$350 million tariff hit will likely come down as it takes steps to offset the damage, such as adding surcharges and relocating manufacturing. And chemicals giant Dupont de Nemours is taking measures to reduce estimated tariff costs of US$500 million down to US$60 million, or about 10 US cents a share.
“Our teams have been carefully analysing ongoing global supply-chain dynamics, engaging with our customer and supplier base, and actively working on a number of tariff mitigation actions, including production shifts, sourcing alternatives, surcharges, and product exemptions,” CEO Lori Koch told analysts on a May 2 earnings call.
Passing along costs
GE Vernova, the energy business that GE spun off last year, expects tariffs to add as much as US$400 million in costs this year. The company plans to counteract that impact by leaning on inflation-protection provisions and change-of-law clauses in contracts to pass on some of the cost of tariffs to customers, while also cutting expenses and reorganising its supply chain to lessen its dependence on China.
Medical instrument specialist Thermo Fisher Scientific and Johnson & Johnson each said they expect to lose US$400 million to tariffs in 2025. Another drugmaker, Merck & Co, said tariffs will cost it US$200 million this year.
Even food companies are getting dinged by the import duties. Hershey said it sees US$15 million to US$20 million of tariff-driven costs in the second quarter. But as cocoa inventories wane, the chocolate- and candy maker said it expects duties to drive up costs by as much as US$100 million in both the third and fourth quarter before accounting for offsetting actions. BLOOMBERG
