Trump tariffs could hurt S&P 500 earnings by ‘few percentage points’- Citi

Investing.com-- Citi analysts warned that increased trade tariffs under President-elect Donald Trump had the potential to dent corporate earnings, and that the broader market had still not priced in this risk. 

Market focus turned squarely to U.S. trade tariffs this week after Trump threatened to impose more duties on imports from China, Canada and Mexico. Trump said he will impose a 10% additional duty on China and a 25% duty on Canada and Mexico, claiming that the measures were aimed at curbing illegal immigration and illicit drugs.

U.S. sectors with heavy exposure to Canada and Mexico, or even global trade, are likely to be sensitive to increased trade tariffs. Canada’s energy exports to the U.S. are also expected to be impacted, with a Reuters report this week stating that Trump will not exclude energy imports from his planned tariffs. 

Citi said on the earnings front, tariffs could cut earnings estimates for the S&P 500 in 2025 by “a few percentage points,” and could erode gross margins by more than 250 basis points. 

Still, the brokerage noted that a large number of corporations were granted relief from the tariffs during Trump’s first term. The president-elect’s recent comments also did not imply the tariffs would be imposed as is, leaving the door open for less severe trade duties.

Citi said markets were moving from a period of election uncertainty into a period of policy uncertainty, citing the many unknowns over what Trump’s second term will bode for markets.