Executives Analyze the Impact of Trump's Tariffs on Earnings Calls

Concerns Over Tariffs in Earnings Calls

Executives are increasingly discussing tariffs on earnings calls, reaching levels not seen since Donald Trump’s previous term. From December 15 through Thursday, 146 S&P 500 companies mentioned "tariff" or "tariffs" on their calls, the highest count since Q2 2019, according to FactSet. This represents about half of the 291 firms that held earnings calls during that period.

Trump was not in office for part of this timeframe but announced new tariffs on Canada, Mexico, and China on February 1. In response, executives have remained cautious in setting investor expectations. FactSet analyst John Butters noted that many companies cited uncertainty, making it difficult to quantify the potential impact of tariffs during earnings discussions.

Trump’s Tariff Strategy and Economic Implications

The Trump administration has imposed a 10% tariff on Chinese imports, while an additional 25% tariff on Canadian and Mexican imports has been delayed until next month following negotiations. Trump has also proposed tariffs on the European Union. The White House has framed these tariffs as a way to curb illegal immigration and drug trafficking, while Trump views them as a tool to secure better trade deals and bring jobs back to the U.S. He has acknowledged that tariffs might cause short-term challenges for businesses and consumers but believes they will ultimately strengthen the economy.

Economists, however, warn that these tariffs could escalate trade tensions and increase consumer prices as companies pass on higher costs. The extent of price hikes will depend on how much businesses absorb and how long the tariffs remain in place.

Companies Respond to Tariff Uncertainty

Several companies are actively assessing potential financial impacts. O’Reilly Automotive CEO Brad Beckham stated that its sales forecasts do not yet factor in tariff-related changes due to the uncertainty. Similarly, Honeywell International, which manufactures thermostats, air purifiers, and jet components, is evaluating the effect of new tariffs, which are not yet included in its guidance.

Ford CEO Jim Farley noted that the company’s outlook does not yet account for policy shifts from the Trump administration. He warned that while short-term tariffs may be manageable, prolonged tariffs could significantly raise costs, reduce industry profits by billions, and negatively impact U.S. jobs.

Efforts to Reduce Dependence on China

Some companies, such as Mattel, have already adjusted their strategies to mitigate tariff exposure. The toy manufacturer has included the expected tariff impact in its profit outlook, exceeding Wall Street expectations and boosting its stock price. CFO Anthony DiSilvestro stated that Mattel has diversified its supply chain, with China expected to account for less than 40% of its global toy production by 2025—down from the industry average of 80%. As a result, only about 20% of Mattel’s U.S. production will be affected by tariffs on China.

Other businesses have also been working to reduce their reliance on Chinese manufacturing. Despite concerns about tariffs and trade disruptions, overall fourth-quarter earnings growth for S&P 500 companies remains strong. FactSet estimates a 16.4% growth rate—the highest since Q4 2021—showing that corporate profits continue to hold up amid economic uncertainties.