It’s the earnings trend everyone saw coming. And warned about.
Think of it like this. A year ago, those tariffs were like a nasty cold. Irritating but temporary.
Today, for multinational companies, the cold has become a chronic condition.
“President Trump’s trade war is doing significant damage to the US and global economies,” said Mark Zandi, chief economist at Moody’s. “The higher tariffs act like a tax increase on businesses and their customers.”
If President Donald Trump follows through on his threat to raise tariffs again on Chinese imports in December, those tariffs would amount to a more-than $100 billion tax increase next year, Zandi calculated.
Some executives are blaming higher costs from the tariffs directly. Others blame global uncertainty about how deep and how long the tariff regime will last.
“We now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty,” he said.
Harley-Davidson’s CEO John Olin told investors, “We’re looking at our business with an abundance of caution necessary in an environment like this.” Harley wants to send some production to Thailand, to better capture the Asian and European markets.
Some companies have seen disruption from tariffs that haven’t even gone into effect yet.
Of course, part of the strategy of the tariffs was to nudge companies to diversify their supply chains outside of China, and return production home. The president has said, if companies don’t like tariffs, move back to the US. In some cases, that production is moving out of China, but to Vietnam and Thailand, among other places. Still, the president’s trade advisers have said the overall economy is strong enough to absorb any disruptions from tariffs. They are looking for what insiders call a “course-correction” in the US-China trade relationship. Tariffs are the main tool for that. What CEOs would like clarity on is, how long will it last?