Apple, GM among US firms facing billions in tariff costs

SAN FRANCISCO – From Apple to General Motors (GM), corporate America is bracing itself for tens of billions of dollars in damages from US President Donald Trump’s trade war – and that is before most affected goods have landed.

Among US companies that have disclosed financial projections so far, GM sees a US$5 billion (S$6.5 billion) hit in 2025, while Apple expects US$900 million in higher costs in the current quarter. Nvidia is taking a US$5.5 billion charge to account for new export controls.

The Trump administration imposed across-the-board tariffs on most imports and targeted some countries and industries for additional levies.

Duties are as high as 145 per cent on many Chinese imports, and Beijing retaliated with import taxes of 125 per cent on American goods. Foreign-made steel and aluminium also face a 25 per cent US tariff.

The pre-emptive warnings from these and other blue chips may vastly underestimate the overall hit to bottom lines.

Many companies have yet to provide guidance, with some taking a wait-and-see approach. Others have foreshadowed the pain by widening expense ranges, pulling their full-year outlooks, or warning price hikes will erode consumer demand. 

Meta Platforms, for instance, lifted its capital spending projection for the year by as much as US$7 billion, blaming the change in part on higher-than-expected costs for globally sourced equipment. 

“There’s just a lot of uncertainty around this given the ongoing trade discussions,” Ms Susan Li, chief financial officer of the owner of Facebook and Instagram, said on a call with analysts. 

The word “uncertainty” has become a go-to descriptor for many executives during quarterly financial results calls.

The word has cropped up more than 9,000 times so far in those corporate calls this season – more than when it last peaked, at the start of the Covid-19 pandemic, and the highest mentions recorded in Bloomberg data.

Corporate managers are responding in a multitude of ways, including making attempts to shift production out of China and front-load material orders ahead of anticipated price hikes. 

Amazon.com accelerated some inventory purchases in the first quarter ahead of anticipated tariffs. Combined with unrelated costs associated with customer returns, the move lowered its profitability during the first quarter by roughly US$1 billion.

“Obviously, none of us knows exactly where tariffs will settle or when,” Mr Andy Jassy, Amazon’s chief executive, told analysts on a conference call.

Manufacturers are similarly feeling the pinch on profits from tariffs.

Procter & Gamble estimated current and proposed levies could add US$1 billion to US$1.5 billion to its annual costs. The consumer goods giant plans to counter that in part by raising prices on its products.

Stanley Black & Decker, which makes power tools and lawnmowers, estimated a gross tariff impact of US$1.7 billion on an annualised basis. Even with supply chain tweaks and price increases to lessen the blow, the company still expects a roughly 15 per cent haircut to its earnings in 2025.

That is, assuming that sticker shock does not curb demand beyond the point at which the company can contain the damage through cost cuts.

Aerospace and defence giant RTX said it was bracing itself for an US$850 million blow to operating profits, even with mitigation efforts.

Honeywell International, GE HealthCare Technologies and GE Aerospace each project a 2025 hit from tariffs on the order of US$500 million before accounting for supply-chain changes and price increases.

Boeing expects tariffs to increase its manufacturing costs by less than US$500 million annually, including a 10 per cent duty assessed on large components of its 787 Dreamliner that are made in Japan and Italy.

The fallout could worsen if the European Union joins China in imposing reciprocal tariffs that make Boeing’s planes prohibitively expensive for local buyers.

On April 22, 3M told investors that tariffs would cost it as much as US$850 million a year – but only if it took no steps to blunt the impact. The diversified industrial product manufacturer said planned countermeasures will cut its earnings exposure in 2025 to less than half that amount.

Medical instrument specialist Thermo Fisher Scientific and Johnson & Johnson each said they expect to lose US$400 million to tariffs in 2025. Another drugmaker, Merck & Co, said tariffs will cost it US$200 million in 2025.

Even food companies are getting dinged by the import duties.

Hershey said it sees US$15 million to US$20 million of tariff-driven costs in the second quarter. But as cocoa inventories wane, the maker of chocolate and sweets said it expects duties to drive up costs by as much as US$100 million in both the third and fourth quarter before accounting for offsetting actions. BLOOMBERG