If President Donald Trump responded to the threat of tariffs on virtually all Chinese imports into the United States, US companies could suffer the consequences.
Goldman Sachs estimates that if the president imposes duties on the remaining $ 300 billion of untargeted assets, US corporate earnings forecasts could be cut by up to 6 percent.
"Our economists are waiting for an agreement to be finally reached, which will result in a" gradual waiver "for existing tariffs, but we believe that the likelihood of a final series of tariffs on Remaining 300 billion dollars worth of imports has reached 30%, "David Kostin, chief US equity strategist at Goldman, said in a note to his clients this weekend. "Fees pose a higher risk for corporate profit margins than for sales."
This impact occurs in the worst case scenario, when the United States has exacerbated tensions in the trade war by raising the level of tariffs from 10% to 25%, for a total of $ 200 billion.
In fact, Goldman said that the impact would probably be less, as companies adjust their prices to offset the increased costs generated by fares. The company expects companies as a whole to increase consumer prices by 1% to offset tariff costs.
The impacts however vary from one company to another. The semiconductor industry, which relies on China for its supplies, is probably the one that suffers the most damage, as shown by stock prices.
Shares of S & P 500 semiconductor companies have fallen more than 13% in the past month, as distress intensified for how long it will take the US and China to reach an agreement . The sector is by far the worst performer in the large-cap index, followed by the auto sector, down 6.5%, fearing that the industry will also be hit by tariffs.
Corporate profits are stabilizing. With 92% of S & P 500 filings, companies posted an overall 0.5% decline in earnings, the first negative reporting period since the second quarter of 2016, according to FactSet.
Goldman noted signs of pressure on margins, although earnings were better than analysts expected. Despite trade tensions, profit estimates have improved, with the company now forecasting a 3% gain in full year earnings per share driven by tax benefits and higher oil prices.
"Despite these favorable winds, widespread generalized 2019 EPS revisions will likely require a rebound in economic growth or price improvement," Kostin wrote.