Around a week ago, US President Donald Trump ordered far-reaching tariffs against Mexico, China and Canada. The tariffs against the two neighboring countries were suspended for a month a little later, but the stock markets worldwide had already reacted to the step of the USA with strong losses. But why and how do tariffs influence stock prices?
• US customs duties had stock markets kinked in
• Customs affect companies from companies
• Increasing inflation again feared
At the beginning of February, US President Trump realized his threat and initially ordered punitive tariffs to imports from Canada, Mexico and China, which should apply from February 4th. While Mexico and Canada subsequently negotiated a one -month postponement, the tariffs against China came into force as planned, the government in Beijing reacted with counter -tolling.
However, the fear of the consequences of new US trade policy alone caused strong taxes at the German leading index Dax at the beginning of last week. The Asian stock exchanges also slipped. Investors were unsettled by the customs announcements, capitalized capital from risky plants such as stocks and searched for refuge in safe ports, which the gold price in particular benefited and a new all -time high. But apart from the consequences of increasing uncertainty among investors – what concrete effects do this result from new or higher US tariffs for companies and their shares?
This is how tariffs affect the corporate profits
Customs industries are primarily intended to protect domestic industries from foreign competition by increasing imported goods. Because the taxes have to be paid by the importer – not by the exporter – and should therefore persuade them to rely on domestic products. For foreign companies whose goods are affected by the tariffs, the higher prices mean that their competitiveness in the corresponding country drops and thus their sales opportunities are lower. This has a negative impact on your sales and profitability.
But there are also negative effects for companies based in the country that raises tariffs. Because if you are dependent on imported raw materials or components and cannot simply switch to home products completely, you must bear the higher costs yourself or pass it on to customers. This also applies if imports can be replaced by domestic goods, but they are more expensive than the imports before the customs increase. Regardless of how companies decide with a view to the higher costs, this should have a negative impact on their profit, since self -made additional costs reduce the profit margin, while higher prices in turn should reduce demand.
For domestic producers, higher tariffs are a double -edged sword. For example, steelworks and automobile manufacturers with factories in the United States would largely benefit from the lower competition, but the advantages would sometimes be destroyed by increasing component costs, as “Kiplinger”. For companies in the tech industry, such as the Magnificent 7, which have a major impact on the stock market, according to the news side, the expenditure would mainly increase, since they have to pay more for imported electronics and components, such as from China, but not the The same increase in domestic sales could achieve as retail.
Experts in the US stock market expect these effects of tariffs
Analysts from Goldman Sachs estimate that the recently announced US tariffs could reduce the fair value of the broad US index S&P 500 by about 5 percent. According to “Investopedia”, they argue that tariffs either reduce the US profit margins through higher input costs or lead to loss of sales if higher costs are passed on to consumers. “We estimate that each increase in the US customs set would reduce the profit per share in the S&P 500 by about 1-2 percent. If the tariffs announced this weekend are maintained, our profit forecasts for the S&P 500 would therefore be around by 2-3 percent fall, “said the experts.
According to the website, analysts of the Bank of America even expect that a trade war between the USA and its largest trading partners could lead to an eight-percentage decline in the total profits of the S&P 500.
In addition, according to Goldman Sachs, tariffs would further enhance the US dollar, which would cause US exports to become more expensive, as “Investopedia” reports. Ultimately, this would harm the US economy itself, since a stronger US dollar would make international sales more expensive and thus impair. However, according to the Goldman Sachs experts, these are responsible for 28 percent of the sales of the companies in the S&P 500. In addition, export -oriented companies could suffer from the countermeasures of trading partners, which would further affect their international sales opportunities. It would not only be expected to have a significant decline in profit margins but also to sales, which should also negatively influence the share prices of the companies concerned.
Former JPmorgan chief strategist Marko Kolanovic also warned of risks for the stock market by the new US tariffs and their effects. “The trade war puts us in an environment like 2018 (higher volatility, lower ratings). Anyone who points out that Trump takes care of the stock market should consider that he only reacted by about 5 percent at the time. The tolerance compared to price declines could now be higher, and the markets are located on highs, “he wrote in a post on the short message service X.
Trade was Puts US in 2018 Environment (Higher Volatility, Lower Valuation). Those who point point that trump cares about stock market, should remember that even then he did not real ~ 5% decline. Tolerance for Declines Could Be Higher Now, and Markets Are at Highs.
– Marko Kolanovic (@Markinny) February 2, 2025
Customs could jeopardize interest reduction course of the Fed
At the macroeconomic level, customs increases can also slow down economic growth and heat inflation. According to “Deutschlandfunk”, additional costs in the product chain of products are usually passed on to consumers, which leads to increasing consumer prices. If the consumption becomes more expensive, inflation also takes care of this, as also emphasized “DPA-Afx” towards “dpa-Afx”. If inflation remains high in the long term, the US Federal Reserve’s US Federal Reserve would be forced to keep the key interest rates at the current level for longer or even increase again. However, higher interest rates provide headwinds for the stock prices. Tillers not only have far -reaching effects on individual companies and thus also their share prices, but also on the entire stock market.
Editor finance.net