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(Bloomberg) -- It’s early days, but there already appears to be a clear buzzword among corporate executives this earnings season: tariffs.
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The word has been used at least 140 times in first-quarter sales and earnings transcripts of S&P 500 and Stoxx Europe 600 companies. Just over 15% of firms have reported so far, meaning that if the trend continues, mentions could get close to levels seen in 2018, when US President Donald Trump was previously in office.
While Trump has been clear since his November election win that sweeping tariffs are coming, he’s been vague about the details, leaving corporate executives in a tricky position when it comes to making plans for the year.
“The imposition of tariffs, which is very likely, and any reciprocity will have an impact on our business and profitability,” Vaibhav Taneja, chief financial officer of Tesla Inc., said during the company’s earnings call on Wednesday. “We’ve tried to localize our supply chain in every market, but we are still very reliant on parts from across the world for all our businesses,” he added.
Executives at hospital management firm HCA Healthcare Inc., telecommunication equipment manufacturer Ericsson AB and software giant SAP SE all said during recent earnings calls that they will need more details before being able to estimate the impact from tariffs.
“Trump’s stance on tariffs changes every day so it’s impossible at the moment to price the US trade policy in a top-down model,” said Francois Rimeu, a strategist at La Francaise Asset Management in Paris. “Personally, when looking at European equities, I just don’t price it at all in my own model because I don’t know what his trade policy will turn out to be.”
Citigroup Inc. strategists estimate that a broad 5 percentage-point hike in global tariffs from the current 2.5% level would hit S&P 500 earnings growth by a mid-single digit, though some of that would be offset by potential tax cuts. Tariffs of 10% on European goods would shave off between 1% and 2% of earnings per share, the strategists led by Beata Manthey wrote in a report published earlier this month.
In his first week in office, Trump pledged to hit Mexico and Canada with 25% levies, while applying either a lower tariff or no penalty at all on goods from China. Europe has been spared so far, but in his latest comment, Trump said he wants to impose across-the-board tariffs that are “much bigger” than 2.5%.