-
According to Barclays, Trump’s proposed tariffs would reduce S&P 500 earnings by as much as 4.7% next year.
-
The presidential candidate has pledged to impose universal tariffs on all US trade if elected.
-
The firm outlined which five sectors are most vulnerable to losses if Trump wins and imposes tariffs.
Donald Trump’s plan to tax virtually all US imports would have a major impact on profits in 2025, according to research from Barclays.
The current outlook sees the election as a coin toss between Trump and Kamala Harris, his Democratic rival. But the outcome has major implications for trade policy, given the former president’s commitment to erecting trade barriers in the U.S.
“Other countries are finally going to pay us back, after 75 years, for everything we’ve done for the world. And the tariffs are going to be substantial in some cases,” Trump said during Tuesday’s presidential debate.
He previously said that if he were elected president, all countries would face a universal tariff of 10%, while import duties on Chinese products could rise to as much as 60%. A 100% tariff on cars imported through Mexico could also be on the horizon, Barclays quoted him as saying.
The bank expects that this policy, if implemented, will weigh on the S&P 500’s earnings.
Certainly, U.S. companies have ways to avoid higher costs associated with tariffs, Barclays said. That includes shifting supply chains or passing prices on to consumers.
But import duties will erode profit margins somewhat, as companies risk losing market share if they do not cover some of the costs.
“We conclude that SPX earnings would be negatively impacted by 3.2% if Trump’s new tariffs were to be implemented and by another 1.5% if those countries responded with similar measures,” analysts wrote Thursday.
Companies that rely heavily on supply chains are particularly at risk. According to Barclays, the five sectors most at risk are: materials, discretionary goods, industrials, technology and healthcare.
Discretionary stocks would be the hardest hit by tariffs on earnings per share, with Barclays data showing earnings by sector would fall by around 10%.
Meanwhile, materials are the most affected by retaliatory tariffs on exports, with sector revenues expected to fall by almost 8%.
Other economists have loudly criticized Trump’s tariff plan, saying it would fuel inflation, as prices rise as sales of foreign products decline.
According to Barclays, inflation is expected to rise by 0.09 percentage points in the short term and US GDP could fall by 1.2% in the first 12 months.
“While the new proposed tariffs would have a modest direct negative impact on corporate profits if implemented, the secondary effects of higher cost-push inflation and slowing economic growth would pose an additional headwind to corporate profits and cause further pain,” the bank said.
Read the original article on Business Insider
