Corporate America is caught in the crossfire of trade war

Corporate America is caught in the crossfire of President Donald Trump's trade war.The list of high-profile ca...

Posted: Jul 26, 2018 5:47 PM
Updated: Jul 26, 2018 5:47 PM

Corporate America is caught in the crossfire of President Donald Trump's trade war.

The list of high-profile casualties from the tariffs is mounting. Iconic American companies as diverse as Harley-Davidson and General Motors to General Electric and 3M have all warned that rising costs from tariffs will eat into their profits.

Even Whirlpool, an early fan of Trump's tariffs, is getting squeezed by skyrocketing raw material prices.

Companies are scrambling to cushion the blow, even as they hope for a ceasefire. Hasbro is moving some production of its toys out of China to avoid tariffs. Honeywell and Restoration Hardware are shaking up their supply chains. And Coca-Cola is jacking up prices on customers to help pay for the tariffs on metals.

Trade tensions with China also killed Qualcomm's $44 billion takeover of Dutch chipmaker NXP, a deal that was held up for nearly two years.

The toll from the trade war will probably increase as more companies report quarterly financial results. Besides the direct costs, the fear is that the trade uncertainty causes CEOs to scrap plans to invest their savings from the corporate tax cut by building new factories and hiring more workers. The fallout from the trade war could slow what is otherwise a strong economy.

"We need to resolve this," said David Kelly, chief global strategist at JPMorgan Funds.

"While the economy can absolutely take it right now," Kelly said, "tariff worries a year from now when rates are higher and fiscal stimulus fades could be much more damaging."

Related: Whirlpool loved Trump's tariffs. Now it's struggling

Trade peace with EU?

The good news is that tensions cooled down considerably this week between the United States and the European Union, raising hopes that Trump's threatened auto tariffs could be avoided.

Trump and European Commission President Junker announced on Wednesday the opening of negotiations focused on lowering some tariffs, eliminating the steel and aluminum tariffs and boosting the EU's imports of US liquefied natural gas and soybeans. The apparent breakthrough sent the US stock market soaring.

"Great to be back on track with the European Union," Trump tweeted. "This was a big day for free and fair trade!"

However, it may be too early to declare all-clear on this front. The announcement lacked concrete details and the Trump administration didn't rule out going forward with auto tariffs.

"The trade war has been toned down a bit -- but it hardly has ended," Greg Valliere, chief global strategist at Horizon Investments, wrote to clients.

If anything, Trump's progress with the EU could raise the risk of an escalation with China.

The EU agreement is "likely to embolden the White House" to use tariffs in the battle with China, Goldman Sachs wrote to clients. The investment bank warned against reading the EU developments as a reduction of risk in the fight with China. "In fact, they likely mean the opposite," Goldman wrote.

Related: The trade war is starting to hurt auto makers

Steel companies surge. Autos stumble

Of course, the trade war isn't hurting all companies. Some large US businesses have said they've seen little impact from the tariffs so far. That means Corporate America's overall bottom line should continue to be strong, thanks especially to the corporate tax cut.

And there are a few winners, namely the steel makers that are benefiting from higher prices caused by tariffs. For instance, last week Nucor logged its best second-quarter in the company's history. Profit more than doubled thanks to a 17% increase in its average sale price.

Whirlpool was a winner from tariffs as well, benefiting from the washing machine tariffs that Trump imposed earlier this year. CEO Marc Bitzer told analysts at the time that the tariffs were "without any doubt, a positive catalyst for Whirlpool."

But the steel and aluminum tariffs have raised costs for Whirlpool by $350 million, causing the appliance giant to slash its profit outlook for 2018. Blitzer complained this week that US steel prices have "reached unexplainable levels."

"These are just taxes on American consumers. They are bad. They hurt the economy," Austan Goolsbee, a former top economic adviser to President Obama, told CNN on Thursday.

The impact from tariffs has been the most dramatic in the auto industry. GM, Ford and Fiat Chrysler both slashed their forecasts this week, in part due to higher steel and aluminum costs. GM said its commodity costs jumped by $300 million in the second quarter.

"The challenge has become significantly greater than we originally expected," GM CEO Mary Barra told analysts of rising raw material costs and currency changes.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 250869

Reported Deaths: 5481
CountyCasesDeaths
DeSoto17010171
Hinds16091318
Harrison13250193
Rankin10629208
Jackson10216182
Lee8759141
Madison8186161
Jones6222109
Forrest5917118
Lauderdale5808180
Lowndes5309111
Lafayette491192
Lamar480465
Washington4770123
Bolivar3955106
Oktibbeha390380
Panola365076
Pontotoc361152
Monroe3521104
Warren344597
Union341458
Marshall339165
Neshoba3357152
Pearl River323295
Leflore2992105
Lincoln295685
Sunflower280469
Tate269560
Alcorn262653
Itawamba261159
Hancock260458
Pike259977
Scott244745
Prentiss244052
Yazoo242654
Tippah239749
Copiah239149
Simpson233967
Leake229564
Coahoma228554
Grenada217070
Covington210471
Marion208371
Adams203270
Winston199464
Wayne198730
George197938
Attala193158
Newton189142
Chickasaw182944
Tishomingo182159
Holmes168167
Jasper167735
Clay158233
Stone141520
Tallahatchie139234
Clarke137460
Calhoun135121
Smith119423
Yalobusha116134
Walthall111736
Noxubee110222
Greene109129
Montgomery109134
Carroll104121
Lawrence102117
Perry100531
Amite96825
Webster91924
Tunica86021
Claiborne85525
Jefferson Davis84025
Humphreys82624
Benton81023
Kemper76620
Quitman6838
Franklin65815
Choctaw60013
Wilkinson58325
Jefferson53419
Sharkey42417
Issaquena1596
Unassigned00

Alabama Coronavirus Cases

Cases: 420681

Reported Deaths: 6119
CountyCasesDeaths
Jefferson61755921
Mobile30058548
Madison26852186
Tuscaloosa20652266
Montgomery18876305
Shelby18421114
Baldwin16176182
Lee12393101
Morgan12175113
Etowah11687168
Calhoun11078200
Marshall10158107
Houston8556148
Cullman7999105
Limestone796274
Elmore7783101
DeKalb767197
Lauderdale752883
St. Clair7502120
Talladega6145108
Walker5880174
Jackson578841
Colbert529873
Blount529283
Autauga515455
Coffee438156
Dale394381
Franklin365248
Chilton335365
Covington326968
Russell326810
Escambia316142
Dallas302896
Chambers281869
Clarke279633
Tallapoosa2607107
Pike247629
Marion244650
Lawrence242547
Winston225535
Bibb214447
Geneva199535
Marengo197829
Pickens196231
Hale175442
Barbour172336
Butler168458
Fayette167126
Cherokee160030
Henry152721
Monroe145017
Randolph138835
Washington137026
Clay126145
Crenshaw118644
Lamar117519
Cleburne117223
Macon114335
Lowndes109535
Wilcox102621
Bullock98728
Perry96919
Conecuh94220
Sumter88826
Greene75723
Coosa60515
Choctaw51224
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