Tariffs Spark Unease Among Corporate Leaders, Prompting Reassessment of Capital Expenditures
S&P 1500 companies have increased their 2025 capital expenditure expectations by 5%, but this growth is muted to 2% for firms with significant tariff exposure. Those with high sales exposure to Canada, Mexico, and China have even revised down their plans by 1%.
Tariff Concerns Weigh on Business Decisions
Management mentions of tariffs in earnings calls have soared, and executives express concerns over uncertainties and potential delays in investment decisions. Companies with greater exposure anticipate higher inflation, although overall price announcements remain within pre-pandemic ranges.
Trump's Tariff Spree and Retaliation
The Trump administration has imposed tariffs on imported steel (25%) and Chinese imports (10%). China has retaliated with tariffs on certain chips and metals. Trump has paused tariffs on Canada and Mexico for 30 days.
Further Tariffs and Extensions
Economist Jan Hatzius predicts an extension of Mexico and Canada tariffs but expects further increases on China. New tariffs may also target EU autos and imports of critical goods like pharmaceuticals and semiconductors.
Market Reaction and Corporate Caution
Markets have initially shrugged off tariff concerns, with the Nasdaq Composite and Dow Jones Industrial Average posting gains in February. However, executives are growing wary, acknowledging that tariffs and rising business costs create planning challenges.