Corporate America is stumbling in the dark, and so are investors.
Ford and General Motors executives say they can’t estimate what lies ahead. There’s too much fog even to hazard a guess, so both companies have suspended earnings guidance — signals about future sales and profits — leaving investors to navigate on their own. And the automakers are not the only ones. A broad range of companies, including Delta Air Lines, Southwest Airlines, the footwear company Skechers, UPS and the engine manufacturer Cummins, say they can’t talk confidently about the future.
It’s earnings season again on Wall Street, and it’s a strange one. Typically, publicly traded companies release their recent financial data every three months and then discuss what to expect in the weeks ahead. Not this time.
The backward-looking performance data is available, as usual, but it’s already ancient history. The Trump administration’s on-again, off-again imposition of the steepest tariffs in a century has shifted the outlook for the global economy and for individual businesses so thoroughly that many executives, especially those affected directly by tariffs, can’t project ahead in a meaningful way.
“Given material tariff-related near-term risks and the potential range of outcomes, we are suspending guidance for full year 2025,” Sherry House, Ford’s chief financial officer, said this week.
She enumerated some of the things that Ford doesn’t know: “These near-term risks include, among other things: industrywide supply chain disruption impacting production; future or increased tariffs in the U.S.; changes in the implementation of tariffs, including tariff offsets; retaliatory tariffs and other restrictions by other governments and the potential related market impacts; and finally, policy uncertainties associated with tax and emissions policy.” That’s quite a list, but it’s a realistic one.
No wonder “uncertainty” has become a go-to word for corporate executives. They uttered it in 87 percent of earnings calls this season, compared with 38 percent in the previous three months, according to John Butters, the vice president and senior earnings analyst of FactSet. Executives used “tariffs” in 93 percent of earnings calls. “Recession” came up in 30 percent of these discussions, versus 3 percent in the previous quarter.
Solid economic and market assessments require knowledge of how far the administration will go with tariffs and other matters weighing on consumers and businesses. Right now, it’s impossible to know.
Consider the precarious state of U.S. relations with its three biggest trading partners, Mexico, Canada and China.
President Trump wants the U.S. military to enter Mexico to fight the drug cartels. This past Sunday, he confirmed that he had urged Claudia Sheinbaum, Mexico’s president, to approve a U.S. military incursion.
In a statement this past weekend she told the Mexican public how she responded. “I told him, ‘No, President Trump, our territory is inviolable, our sovereignty is inviolable, our sovereignty is not for sale.” She added, “We will never accept the presence of the army of the United States on our territory.”
But is this really the end of the matter? With Mr. Trump, it would be unwise to make that assumption.
Then, there’s Canada. In a White House meeting this past week with Mark Carney, Canada’s new prime minister, Mr. Trump insisted, yet again, that one day Canada would become the 51st state. Prime Minister Carney quickly responded: “It’s not for sale it won’t be for sale, ever.” Mr. Trump could have left well enough alone — but he did not. “Never say never,” the president said.
Because North American car production in Canada, Mexico and the United States is intertwined, diplomatic relations among the three countries have a direct bearing on the prospects of the big car companies. Where tariff levels will end up is crucial to the automotive industry — and, of course, to U.S. workers and consumers. Without greater certainty, production will slow or stop, and prices will rise.
But it’s not just autos that are affected by Mr. Trump’s vacillating threats and rules on tariffs. Just about everywhere you look, you can find companies engaged in tortuous maneuvers to maximize profits and cope with possible tariffs, whatever they will end up being.
Take Apple. Tim Cook, the company’s chief executive, said on a May 1 earnings call that tariffs in the three months starting in June are most likely to add $900 million to Apple’s costs. But, he said, that estimate assumes “the current global tariff rates, policies and applications do not change for the balance of the quarter, and no new tariffs are added.” That assumption, of course, is probably not valid. It might be partially why Mr. Cook warned that “this estimate should not be used to make projections for future quarters.”
Many Apple products have been made in China for years, but even that’s changing quickly because of the tariffs.
“We do expect the majority of iPhones sold in the U.S. will have India as their country of origin and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch and AirPods products,” Mr. Cook said. “China would continue to be the country of origin for the vast majority of total product sales outside the U.S.”
How much iPhones and other Apple gadgets will cost, and whether Apple can maintain its fat 47 percent gross margin in coming quarters, are crucial questions for investors in the giant company.
So are U.S. relations with China, which have fallen to their lowest ebb in decades. U.S. tariffs on many Chinese products now stand at 145 percent, a level so high that it amounts to “the equivalent of an embargo,” in the words of Scott Bessent, the Treasury secretary. Apple, is, for now, benefiting from a temporary exemption from tariffs on smartphones from China, though higher tariffs on semiconductors (key ingredients of smartphones and much else) are being contemplated by the Trump administration, and the smartphone exemption may be rescinded. In addition, Apple has come under pressure to shift manufacturing to the United States, which would increase iPhone costs, too.
The first official U.S.-Chinese meeting since the start of the trade conflict is scheduled for this weekend in Geneva. But both sides have dampened expectations. It represents a start, they say, but it isn’t very likely that there will be substantive negotiations.
Because of tariff-induced distortions, economic data has become difficult to parse. Businesses and consumers rushed to buy imported goods in the first months of the year, before tariffs kicked in. The U.S. trade deficit soared, which affected gross domestic product figures for the first quarter — pushing what would have been three months of positive growth into a negative territory. And the import surge may already be over. Container ship traffic from China to U.S. West Coast ports has plummeted, which could mean shortages of imported products on U.S. store shelves in a few weeks.
“Uncertainty about the economic outlook has increased further,” the Federal Reserve said in a statement this past week. And Jerome H. Powell, the Fed chair, said in a news conference, “There’s so much uncertainty about the scale, scope, timing and persistence of the tariffs.” Until it’s clear whether the greatest imminent economic threat from tariffs is higher inflation or a slowdown in the economy — both could develop, in a dreaded phenomenon known as stagflation — the Fed will hold interest rates steady, Mr. Powell said.
The stock market has been remarkably resilient, considering the scale of the looming, self-inflicted harm that the tariffs could bring on the U.S. economy. Stock analysts have begun, ever so slowly, to take the tariff shock into account in their estimates. But while they are projecting a deceleration in profit growth for U.S. corporations, they have not, for the most part, included the possibility of a recession. They are penciling in a likely reduction in the rate of profit growth this year — but expect profits to keep growing — with a re-acceleration in 2026.If they are right, the stock market is likely to rise over the next couple of years.
And they may be right. But, really, they are basing these projections on scant evidence. Risk averse investors will want to stash a substantial sum in a safe place for the short term, because U.S. government policy may roil the markets. It’s not a pleasant outlook but it’s what the economic situation requires.
