Businesses yank forecasts as tariff uncertainties cloud the future
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The unpredictability of the international trade landscape is paralyzing corporate America, leading companies to suspend their outlooks or express deep uncertainty about where their businesses are headed.
Why it matters: President Trump has launched a global trade war fueled by a massive increase in tariffs — particularly on China — but has since sent a slew of mixed messages about the state of affairs.
State of play: The President's "reliably unreliable" tariff policy, as one analyst put it, is making a mockery of corporate America's attempts to guide future revenue and earnings expectations.
- American Airlines Thursday yanked its full-year forecast, citing what executives called significant uncertainty over bookings beyond the summer. Key competitors Delta and Southwest recently did the same.
- PepsiCo Thursday reduced its full-year outlook amid what CFO James Caulfield called "heightened macro and consumer uncertainty." The company's international supply chain is exposed to tariffs in a variety of ways, including raw materials, packaging and finished goods.
- Walmart earlier this month said it was expanding the "range of outcomes" for its quarterly income-growth forecast, saying it wanted to maintain strategic flexibility as tariffs are implemented.
Between the lines: The on-again-off-again nature of Trump's tariffs — and the corresponding effect on costs and consumer spending — is the primary issue.
- Caulfield said PepsiCo has "factored in what we know about tariffs today" and is pursuing "mitigation plans," some of which "we'll be able to execute more quickly" while others "will take more time to execute."
- "Uncertainty around the permanence of the proposed tariffs" is a big reason why tech companies are likely to face a reduction in global IT spending growth from a previously forecast 9% to a range of 5%-7%, according to S&P Global Ratings credit analyst Andrew Chang.
- In the auto industry, automakers and suppliers are scrambling to ascertain whether they need to make significant supply chain changes, which can take years to pull off, based on policy that might not be in place when they're finished.
The bottom line: The only certainty these days is that corporate executives will decry uncertainty.
