Impact of Tariffs on Your Industry Vulnerability
Headline: Sector-Specific and Broader Economic Impacts of President Trump's Tariffs
The tariffs introduced by President Trump have had significant effects on various sectors and the broader economy. Here's a breakdown of the impacts on different industries and the economy as a whole.
Sector-Specific Impacts
- Clothing and Textiles: Tariffs have resulted in a rise in consumer prices, with shoe prices increasing by 44% and apparel by 40% initially, before stabilising at 20% and 18% increases, respectively.
- Manufacturing vs. Other Sectors: While tariffs have boosted US manufacturing output by 2.6%, this gain is more than offset by declines in other sectors such as construction (down 4.1%) and agriculture (down 0.8%), indicating uneven sectoral effects.
- Automakers and Goods-Producing Sectors: Many companies in these sectors have issued profit warnings or revised their forecasts downward due to tariffs.
- California's Economy: As a major manufacturing and agriculture state, California has faced outsized tariff costs, with $11.3 billion in costs from January to May 2025 and 64,000 job losses, with trade and logistics sectors hit hard due to disruptions at ports and hiring declines.
Broader Economic Impacts
- Tariffs are estimated to have contributed to a 0.9 percentage point reduction in US real GDP growth in 2025 and a persistent 0.5% smaller economy long-term, equivalent to about $135 billion yearly.
- The labor market has been affected, with a 0.5 percentage point rise in unemployment and 641,000 fewer payroll jobs by the end of 2025.
- Price increases due to tariffs could cost households about $2,400 extra in 2025, squeezing family budgets and contributing to a broader economy of uncertainty that affects consumer and business decisions.
Company Management of Tariff Costs and Negative Impacts
- Corporate executives remain uncertain about the full tariff impacts but are actively seeking to manage costs and protect margins.
- Common strategies include supply chain adjustments to source materials elsewhere or alter logistics, scaled-back marketing promotions, and increased product prices passed on to consumers.
- Large companies may use the tariff environment as cover to raise prices beyond direct tariff costs, adding to consumer inflation.
- Some firms have started stockpiling inventory to hedge against price increases and supply shortages caused by tariffs and disrupted global supply chains.
Overall, tariffs have led to a complicated trade-off at the sectoral and macroeconomic levels, with certain industries benefiting slightly in output while others and consumers bear significant costs through job losses, price hikes, and economic uncertainty. Companies are actively managing these challenges but face ongoing difficulties due to the unpredictability and persistence of tariff policies.
Stock Market Performance
Despite the impacts on certain sectors, the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average have made new all-time closing highs since the introduction of Trump's tariffs. Some sectors, such as Utilities and Industrials, have performed well, with Utilities being the top-performing sector on a year-to-date basis. However, sectors like Health Care and Real Estate have underperformed, with the Health Care Select Sector SPDR Fund being the only one of the 11 S&P 500 sector ETFs with a negative return since April 7.
Company Examples
- General Motors has added 21.6% due to $1.1 billion in tariff costs for the second quarter and expects a total impact of $4 billion to $5 billion for the full year.
- 3M guided down the full-year per-share impact of tariffs from a range of 20 cents to 40 cents to a net total impact of 10 cents.
- Ford Motor recently reported its first quarterly loss in two years due to an $800 million tariff hit.
- UnitedHealth Group will continue to move based on traditional fundamental factors and the market's perception of its ability to generate free cash flow for investors.
- Procter & Gamble expects approximately $800 million in higher costs for the full year due to Trump's tariffs.
- Tesla, a consumer discretionary stock, is better positioned than traditional automakers due to its domestic production and supply chain concentration in North America.
- Johnson & Johnson forecast $400 million of 2025 tariff impacts but cut that figure to approximately $200 million when it announced second-quarter results.
Upcoming Earnings Reports
- Nvidia will report fiscal 2026 second-quarter results after the closing bell on Wednesday, August 27.
- Apple faces $1.1 billion in additional costs due to tariffs during the current quarter.
Conclusion
While the tariffs have had substantial sector-specific and broad economic impacts, companies are actively managing these challenges. However, the unpredictability and persistence of tariff policies continue to pose ongoing difficulties for many businesses.
- The rise in consumer prices due to tariffs has impacted lifestyle choices, with shoes and apparel becoming more expensive, potentially affecting household budgets across various technology-driven channels, such as online shopping.
- As President Trump's tariffs continue to affect different sectors, the broader implications for the US economy's overall financial stability become evident, with predictions of a long-term reduction in economic growth and increased unemployment rates.
