Goldman Sachs Warns of Corporate Earnings Hit from Trump's Tariffs
Goldman Sachs economists project significant impacts on Corporate America's profitability if President Trump's announced tariffs persist. The brokerage estimates that every 5% increase in tariffs could lower S&P 500 earnings per share by 1-2%. Consequently, the firm predicts a potential 2-3% reduction in its S&P 500 earnings forecasts, excluding other market factors.
Despite the tariffs' potential impact, Goldman Sachs suggests a substantial likelihood that those against Canada and Mexico will be temporary. Their FX analysts anticipate further dollar appreciation, with limited impact on aggregate S&P 500 earnings.
The brokerage emphasizes that investors' perception of tariffs as a short-term negotiation strategy could minimize the equity market impact. However, perceptions of escalating tensions could amplify the impact on equities.
Goldman Sachs' previous projections indicated a 25% tariff on Canadian and Mexican imports would increase the U.S. effective tariff rate by 7 percentage points, leading to a 0.7% rise in core PCE prices and a 0.4% GDP reduction.