Tariffs Surge 132% in Earnings Calls: Uncertainty Soars as Well

Tariffs are a prominent concern for U.S. business leaders, which can be seen from their remarks during the first quarter's earnings reports, currently about halfway through the period.

The evaluations from the approximately 50 S&P 100 firms that had submitted their reports by Tuesday morning showed significant variation though. While some businesses provided an extensive breakdown of how tariffs could negatively affect them, others stated they were not currently worried about this issue.

Barron's analyzed the earnings-call transcripts of these firms using help from AlphaSense and discovered a 132% rise in mentions of "tariffs" over the last 90 days versus the prior quarter, along with a 20% jump in the term "uncertainty." This uptick is likely due to the tariff policies introduced by the Trump administration on April 2nd.

The uncertainty is already causing significant disruptions in the economy by halting business operations, eroding consumer trust, and impeding firms' capacity to forecast their performance for the coming year.

"The world has not encountered such significant potential effects on trade in over a century, hence the only certainty we have is that we're unsure whether any of our predictions will materialize," stated Carol Tomé, CEO of UPS, during an investor conference call on Tuesday. ("Uncertainty" was mentioned 22 times throughout the discussion.") sequence of UPS’s earnings call .)

Here are seven additional insights from the earnings season up until now:

Economic Mayhem

Investors were eager to listen to the company’s insights on how tariffs might influence the broader economy. In response, many executive teams addressed their concerns, primarily stating that increased duties would likely harm economic conditions. Nonetheless, most of these executives also mentioned that the full repercussions will only become clear once the final tariff rates are determined.

"The straightforward reality now is that we aren't certain about how trade policies will ultimately land, and we also can't predict their exact impact on the actual economy," stated Morgan Stanley CEO Ted Pick, further noting that most economists agree growth is likely to weaken this year.

Goldman Sachs’ expectation for growth in the U.S. has fallen “meaningfully” to 0.5% from over 2%, said Goldman Sachs CEO David Solomon added that the likelihood of a recession had gone up.

Robin Vince, the CEO of Bank of New York Mellon, conveyed a comparable sentiment: "This ambiguity has led to increased hazards in the near and medium term as it permeates both capital markets and the actual economy," he stated.

Everyone's Gaze Fixed on the Consumer...

Considering that consumption constitutes approximately 70% of the U.S. Gross Domestic Product, it’s not unexpected that companies are monitoring customer behavior as part of their annual predictions. Essentially, customers remain steady, yet concerns over tariffs are influencing their expenditure patterns.

Certain U.S. citizens are accelerating their purchases to circumvent potential impacts of tariffs. Conversely, some individuals have stopped shopping entirely until there’s greater certainty regarding the tariff situation.

"The consumer has faced numerous challenges, which can be overwhelming. Therefore, what we're observing seems to be a rational reaction from consumers to take a breather," stated Andre Schulten, the CFO of Procter & Gamble.

Affluent Americans might be an exemption. American Express, catering to high-income customers, stated that they aren't observing any alterations in purchasing patterns.

"Our cardholders might claim they lack faith in the economy, yet they persist in spending," stated American Express CEO Stephen Squeri.

…And Businesses

Many firms have observed that the ambiguity related to tariffs is causing enterprises to be cautious when making investment choices. This situation leads them to postpone building their stock of supplies (and occasionally, oversupplying) as well as halting new hires and acquisitions.

Everybody desires reduced ambiguity and increased transparency regarding future policies, as mentioned by Goldman Sachs' Solomon. Clients are expressing this sentiment. They aim to grasp where these policies will ultimately land so that they can proceed with their capital allocation, investment strategies, and planning processes.

Even tech firms that get most of their income from services instead of hardware might experience a downturn once policies stabilize.

“In the near term, uncertainty may cause clients to pause and take a wait-and-see approach,” said IBM CEO Arvind Krishna. He added that the company’s consulting business was also “more susceptible” to discretionary pullbacks and government cuts.

Small and medium-sized enterprises might play a significant role in reducing expenditures. A number of these companies currently procure goods directly from China, and although they are collaborating with factories to shift production to various nations, they lack the scale and economic adaptability possessed by larger corporations when it comes to altering their supply chains, as noted by Tomé at UPS.

Creative Guidance

The unpredictability has complicated matters for businesses trying to forecast accurately for the coming year. Consequently, "S&P 500 firms have become inventive in their discussions of the future," observes Callie Cox, who serves as the chief market strategist at Ritholtz Wealth Management.

PepsiCo sought to reset investors' expectations right from the beginning. lowered full-year earnings guidance , pointing to increased volatility in the future and a sluggish consumer market. Consequently, some companies opted for to eliminate guidance completely , including airlines such as American, Southwest, and Alaska. General Motors withdrew its profitability outlook for 2025, stating that the previous prediction is no longer valid. “can’t be relied upon.”

Many businesses, nonetheless, kept their yearly forecasts intact. For instance, Danaher, which manufactures scientific instruments, stated that their projections remained constant since they anticipate fully countering the expected effects of tariffs. Conversely, corporations such as RTX, a leading entity in defense and aerospace, upheld their financial expectations yet acknowledged that potential tariff repercussions were not included in their current annual predictions.

The leaders at 3M reaffirmed their profit outlook; however, they noted that tariffs might reduce earnings per share by between 20 cents and 40 cents each share unless some relief measures come into play.

Despite the turmoil, some guidance remained intact. AbbVie modified its adjusted figures. earnings per share forecast above expectations —however, it does not indicate any changes in trade policies, such as possible tariffs specific to pharmaceuticals.

"It's too early to predict the impact, but once we have this data, we will share it at the right moment," stated AbbVie CEO Robert Michael. Similarly, other healthcare firms chose not to alter their broad guidelines until the industry-specific duties are finalized.

Mitigation, Mitigation, Mitigation

Firms are undertaking various strategies to mitigate the impact of tariffs. The primary approaches involve restructuring their supply chains, such as expanding sources from multiple countries and procuring goods within the U.S.

Companies are likewise in talks with suppliers to attempt sharing the load of increased import expenses, and cutting down costs throughout their operations to reallocate funds towards the import duties. For example, Hasbro mentioned they were accelerating its cost-cutting program And now aims to save between $175 million and $225 million this year.

If everything else falls through, most people will turn to a time-honored approach: increasing prices.

As Noel Wallace, the CEO of Colgate-Palmolive, pointed out, the issue is that should consumer demand drop, businesses would have limited flexibility to increase their prices.

The pricing landscape will remain tough moving forward, as far as I can tell," Wallace stated. "With tariffs coming into effect, people will seek methods to add value within their categories primarily via innovation, based on my perspective. However, adjustments in price may become necessary in various global markets.

Companies oriented towards businesses might have greater leeway to raise their prices compared to those focused on consumers.

All Good Here

As many businesses warned their investors about the disruption caused by increased tariffs, a fortunate few expressed little worry regarding these taxes.

For example, telecommunications companies were certain that customers wouldn't disconnect their telephone services, and they believed they could transfer any increase in phone prices directly to the end user.

Every time I'm questioned regarding economic matters, my initial response is that we're not truly the ones you should be asking," stated Mike Sievert, the CEO of T-Mobile. "We might just be the last indicator for your coal mine since individuals have such strong feelings about this sector; they will manage to continue paying their expenses.

Netflix’s leadership conveyed a sense of assurance, highlighting that home entertainment grows "highly significant" for families within challenging economic conditions.

The renewable energy company NextEra Energy anticipates that tariffs will impact the capital expenditure of its energy resources division by under 0.2%, a figure that might be bargained down to nothing.

"When reflecting on our current position, I am quite optimistic regarding the tariffs. They will hardly affect our business operations," stated CEO John Ketchum.

We’re Talking to Trump

Several businesses aimed to calm investor concerns by stating they were collaborating with the administration to secure the most favorable outcome for their sector.

"I believe every single day involves interaction with individuals within the administration, right from cabinet secretaries all the way up to President of the United States," stated Boeing CEO Kelly Ortberg.

"We're investing significant effort into ensuring the administration comprehends the impacts of both temporary and permanent tariffs—not only for our company but also for the broader aviation sector within the U.S.," he noted.

This implies that companies are carefully balancing their support for reduced tariffs with maintaining favorability from the president.

We have presumably been, as I see it, full-throated in our support In line with the administration’s initiatives to boost American competitiveness and rejuvenate domestic manufacturing, GE Aerospace CEO Lawrence Culp commented, "We share common ground on these goals." He further noted, "However, it’s often overlooked that the industry benefits from a substantial $75 billion trade surplus primarily due to the tariff-free environment we've maintained since 1979. As such, our suggestion has been for the administration, amidst addressing numerous challenges, to recognize the robust standing of our nation under this current system without tariffs and potentially reconsider reinstating similar policies."

Send your message to Sabrina Escobar. sabrina.escobar@barrons.com