Wall Street Bracing for Earnings Fallout Due to Tariffs

Tariffs have started to cause havoc with manufacturers and another round of caution along with uncertainty is expected on Wall Street from major industrial companies during the next week when a series of companies report their earnings.

Investors have become worried about what impact the U.S. trade war with Beijing and other trading partners, will have on earnings, as they start to escalate. In June, the Deutsche Bank estimated that a trade dispute escalation that affects $200 billion in imports, would hit growth in earnings by between 1% and 1.5%.

An analyst on Wall Street said this week that if the political rhetoric of today grows and turns into true protectionist policies, it would be a negative for every business in the U.S. as well as abroad.

Manufacturers across the U.S. are worried about the trade policies in Washington, with some even stating that the uncertainty that is related to the tariffs has already hit them.

That is beginning to appear in the early earnings report by different companies. Honeywell International, Stanley Black & Decker, and General Electric earnings show companies that are facing higher cost already because of tariffs enacted, and the uncertainty of tariffs on up to $500 billion in goods from China that President Trump has threatened.

GE announced that it expects the tariffs on imports it makes from China to increase its cost by as much as $400 million while Alcoa said tariffs led to an additional $15 million in overall costs.

On Monday, earnings season kicks into high gear for second quarter results, with Corning, Ford Motor, 3M and Boeing all scheduled to release earnings.

Since the announcement of the U.S. placing tariffs on imports on March 1, the S&P 500 industrials .SPLRCI has dropped close to 3%, reflecting the dependence the sector has on international commerce.

Many of the nearly 180 companies in the S&P 500 reporting earnings next week are not exposed directly to China, but they might have reasons to be concerned.

Harley-Davidson, which in June announced it would be moving some of its production of motorcycles abroad, due to the retaliatory tariffs placed by the European Union, reports results Tuesday.

Qualcomm, which reports Wednesday, depends on two thirds of its overall revenue from China. The chipmaker based in the U.S is facing a waiting game as regulators in China decide on approving a takeover of $44 billion of NXP Semiconductors. The delay is considered to be related to the trade conflict.

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