By Medha Singh
(Reuters) – U.S. businesses have talked a lot about tariffs in the past few months, but very few modeled for them in their earnings outlooks. With President Donald Trump’s multi-front trade war now in full effect, investors and analysts expect a barrage of corporate profit warnings in the coming weeks that could jolt the stock market.
Trump’s escalation of threats to major world economies since returning to office in January has increased fears that inflation will rise and disrupt economic growth.
The U.S. benchmark S&P 500 closed out its worst quarter in more than three years at the end of March. Tariffs of 10% across all imports to the United States, along with much higher levies on dozens of countries, are now set to take hold just about a week before big U.S. lenders kick off the quarterly reporting season, and companies now need to factor in the rapid deterioration of business and consumer sentiment and falling optimism among company finance chiefs.
Throughout the first three months of 2025, tariffs were mentioned more than 800 times on investor events or conference calls by non-financial companies globally, according to S&P Global Market Intelligence, highest in at least 15 years and nearly double the level seen during Trump’s first trade war in 2018-2019.
However, only about 88 U.S. companies specifically mentioned they had not modeled tariff impact into their forecast as the global trade outlook was still evolving, according to S&P. Numerous others were non-specific as to whether they had modeled the potential effect of tariffs – leaving open the possibility of numerous surprises on conference calls this quarter.
Wall Street analysts still expect record profit in 2025, leaving room for more potential downgrades. S&P 500 profits are expected to rise 8% year-over-year for the quarter as of March 28, down from a 12% growth forecast on Jan. 17, according to data compiled by LSEG.
“CEOs will latch onto an opportunity to lower expectations even if it’s painful – they can just say it’s the stupid tariffs, or headwinds, or currency conversion,” said Mark Malek, chief investment officer at Siebert Financial in New York.
The fears about tariffs have introduced an element of uncertainty into the economy, with consumers and businesses in some cases putting off purchases as the White House’s on-again, off-again approach to tariffs made the environment more unpredictable.
That may benefit some companies in the short-term – car sales were notably strong in March, increasing the likelihood for strong figures from Ford and General Motors. But other companies rapidly brought in inventories, which could be a drag on results for other sectors.
“What I think is most meddlesome at the moment, though, is simply the unknown element, the rapidity with which each incremental wave of tariff has been announced,” Skechers Chief Financial Officer John Vandemore said. “All that is creating a significant amount of unknowns. And that’s just very difficult to plan against.”
ESTIMATES PARED
Investor earnings calls throughout the first quarter of 2025 followed something of a pattern – an executive would note the concerns about tariffs, and then mention that they had not modeled for such levies in their profit and earnings assumptions for the coming quarters.
Expect that to continue, analysts said.
“I would continue to expect most companies, if not the vast majority of them, to say in this upcoming earnings report that they do not have visibility, therefore they’re not going to forecast the impact of tariffs,” D.A. Davidson analyst Gil Luria said.
“And worse yet, they’re likely to not forecast and provide as much guidance as they would have otherwise.”
Morgan Stanley said the industries most likely to feel tariff pain are consumer discretionary goods, tech hardware and capital goods.
Among those, the capital goods sector has the strongest pricing power, and is more likely to pass on additional costs to its customers, while consumer discretionary companies do not have the same luxury as consumers are already stressed about inflation, strategists said.
“With more clarity on tariffs, C-suites will need to adjust guidance through the 1Q reporting period,” Citi U.S. equity strategist Scott Chronert said, adding he expects cuts to 2025 estimates in the next few weeks.
Analysts expect year-over-year earnings declines in the consumer staples, energy, materials and real estate sectors in the first quarter, according to data compiled by LSEG.
“Managing risk from tariffs is likely to be an ongoing, dynamic process for the duration of the second Trump administration as tariff threats continue to linger,” Morgan Stanley strategists led by Michael Wilson said in a note on Monday.
(Reporting by Medha Singh and Deborah Sophia in Bengaluru; Additional reporting by Johann Cherian; Editing by Shounak Dasgupta)
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