Factbox: How Trump's tariffs will impact corporate profits, inflation
03/02/2025 16:50
(Updates throughout after Feb. 1 tariffs)
By Johann M Cherian and Pranav Kashyap
Feb 3 (Reuters) - U.S. President Donald Trump's tariffs
on Canada, Mexico and China have the potential to impact
corporate profits, as well as to dictate the path of inflation,
economic growth and stock market performance, analysts said.
While Mexico-exposed names recouped some losses after Trump
agreed to delay new tariffs on Mexico for one month, investors
were still assessing the fallout of the sweeping tariffs.
COMPANIES AND PROFITS
- Goldman Sachs expects the announcements to reduce its S&P
500 earnings per share (EPS) forecasts by about 2% to 3%. It
said every 5 percentage point increase in U.S. tariff rates
could potentially decrease the EPS by around 1% to 2%.
- Tariffs against Canada, Mexico and China could amount to a
2.8% drag on the S&P 500's .SPX profit, if fully enacted, with
the materials and discretionary sector most at risk, Barclays
analysts said, before the tariffs were imposed on Feb. 1.
- A small import price shock in a narrow tariff scenario is
likely to result in a 50 basis points compression in S&P 500
gross margin, while broader tariffs could see margins shrink by
250 bps, Citigroup said, before the announcement.
- Profit margins of exporters could be hit, according to
BlackRock, if inflation causes elevated interest rates and sets
off a dollar rally to its 2022 peak.
AUTOMAKERS
- The U.S. auto sector could face an additional cost of up
to $40 billion annually, which translates to an average increase
of about 7% per car, according to Daniel Roeska, a senior
analyst at Bernstein.
- Canada and Mexico account for nearly one-fifth of the value
of U.S. vehicle consumption and production, Goldman Sachs said
before the tariffs were announced.
- The surcharges imposed on Mexican imports could prove to
be a problem for General Motors, while production could shift to
the U.S., RBC analysts said in a note dated Jan. 28.
- Among European carmakers, the most exposed are Volkswagen
VOWG_p.DE and Stellantis STLAM.MI , with a possible impact to
around 8 billion euros ($8.25 billion) of Volkswagen's revenues
and 16 billion euros of Stellantis revenue, Stifel said, after
Saturday's announcement.
- However, the actual impact could be much lower due to
measures taken by the companies, Stifel added.
STEELMAKERS
- European steelmakers with U.S. production supply chains
integrated with Mexico, Canada and Europe will be directly
impacted, J.P. Morgan said.
- Analysts flag ArcelorMittal MT.LU , Finnish peer
Outokumpu OUT1V.HE as exposed to Mexican and Canadian steel,
while Acerinox ACX.MC and SSAB SSABa.ST have high U.S.-based
production.
- Canada accounts for 70% of U.S. aluminum imports, J.P.
Morgan analysts said in a Feb. 3 note.
SPIRITS
- Beverages and spirits like tequila, mezcal, and beer make
up a substantial portion of U.S. imports, totaling almost $12
billion in trade.
- Spirits groups Diageo DGE.L and Campari CPRI.MI will
be hit hardest by tariffs on Mexico and Canada, said J.P. Morgan
analysts after the Feb. 1 tariff announcement.
- AB Inbev ABI.BR and Heineken HEIO.AS have the largest
EBIT exposure to the two markets, while Remy Cointreau RCOP.PA
and Carlsberg CARLb.CO have the highest EBIT exposure to
China, J.P. Morgan said.
- Around 85% of consolidated sales of Corona beer maker
Constellation Brands STZ.N comes from imported Mexican beer,
according to J.P. Morgan. Piper Sandler sees a potential impact
of $3 to $3.75 per share hit to fiscal 2026 earnings of
Constellation if the tariffs last a full fiscal year.
OTHERS
- Tariffs on Mexico could hurt appliance distributors such
as Whirlpool WHR.N , BofA Global Research said on Jan. 29.
- Construction products companies Masco MAS.N and Fortune
Brands FBIN.N have some sourcing exposure to China. But they
also have dual suppliers for many products and could offset some
of the tariff hurdles with price hikes, BofA said.
- Builders FirstSource BLDR.N could benefit in the
short-term from tariffs on Canadian lumber imports, but that
would likely be offset by lower starts from homebuilders.
INFLATION
- Barclays strategists said the tariffs could lift the
personal consumption expenditure index, the Fed's preferred
inflation gauge, by 35-40 basis points on a yearly basis over a
12-month period.
- Goldman Sachs said tariffs, if implemented, would boost
the U.S PCE index, excluding volatile items such as food and
energy, by 0.9%, according to estimates made before the Feb. 1
tariff announcement.
($1 = 0.9700 euros)
(Reporting by Johann M Cherian, Pranav Kashyap and Lisa Pauline
Mattackal in Bengaluru; Editing by Sriraj Kalluvila)
((mailto:johann.mcherian@thomsonreuters.com;))