Tariffs are being mentioned on 40 percent of earnings calls

  • Tariffs have been mentioned in some form by more than 40 percent of the 146 S&P 500 companies that have already reported second-quarter earnings this season.
  • "We've been working with and talking to the administration and our congressional delegations to ensure we're communicating just how terrible an impact ongoing tariff or trade war would be," Hasbro executives said in one instance.
  • CSX officials said that "from a steel standpoint, both finished steel out and ore business in, [they] have seen some positive as a result of the U.S. steel manufacturers kicking-off production."
President Donald Trump
Jabin Botsford | The Washington Post | Getty Images
President Donald Trump

Despite tweets from President Donald Trump with such claims as “Tariffs are the greatest!” a growing number of companies are starting to feel the burden of the White House’s trade war.

Dealing with the fallout from the president's tough trade tactics is dominating the conference calls company executives typically hold following the release of their earnings results. Tariffs have been mentioned in some form on more than 40 percent of the 146 S&P 500 companies that have already reported second-quarter earnings this season.

In an effort to track corporate America's thoughts on the growing trade dispute, CNBC is amassing statements from earnings calls that involve discussion on the new taxes on foreign goods. The impact seems heavily tilted toward the industrials sector.

New U.S. tariffs on steel and aluminum, for instance, appear to be sending shock waves throughout the economy with mixed effect.

Home appliance manufacturer Whirlpool, which once favored stricter trade controls for its own industry, saw its own shares plummet 14 percent Tuesday after executives blamed rising aluminum and steel costs for lackluster earnings.

"Global steel cost has risen substantially and, particularly in the U.S., they have reached unexplainable levels," Whirlpool chief executive Marc Bitzer told shareholders during the company’s conference call.

Most of the discussions are critical, but there are a few companies seeing benefits.

Nucor, which produces and sells a variety of steel products in the United States and internationally, applauded the recent regulatory efforts.

“The tariffs send a clear message that the U.S. is done asking nicely for compliance with the rules of trade,” said Nucor Chairman and CEO John Ferriola. “The U.S. steel market is also benefiting from a reduction in unfairly traded imports entering our country as a result of years of successful trade cases, and the broad-based tariffs imposed on the Section 232. Imports are down more than 7 percent through the first half of 2018. With all tariffs going into effect in June, we expect this trend to continue.”

Below are some key quotes by company executives from major S&P 500 members about tariffs on these calls, according to FactSet transcripts.

Harley-Davidson

"As a result of the recently enacted tariffs, we expect to incur approximately $45 million to $55 million of increased costs. This includes incremental costs of approximately $15 million to $20 million for steel and aluminum, and approximately $30 million to $35 million for EU tariffs. We expect to absorb a significant portion of these incremental costs through disciplined business management. However, given the magnitude of these unplanned costs, we are adjusting our full year 2018 operating margin guidance."

The Coca-Cola Company

"The price increase I just talked about on the last question is predominantly the price increase from the bottling system on the sparkling brands in particular, which faced a whole series of input costs: freight, yes; plastic resins, yes; metal in all its various forms for many reasons, including tariffs. So there is some broad-based push on input costs that have kind of come in and affected us and many other industries as well."

Union Pacific

"The concern is that tariffs are just going to basically be a tax, whether it's on U.S. consumption or U.S. products going overseas. And generally, that's going to retard — that's going to reduce the amount of demand. We haven't necessarily seen that wholesale ... but it's pretty early. Those things just went into effect. We have seen some very specific impacts on us. But they're pretty granular, right? Inbound on some rail that we buy from Japan, there was a substantial 25% tariff on the last boat that was received. And then we've seen some other discrete impacts on customers."

Honeywell

"We have seen inflation accelerate in a number of areas within the business, most notably in transportation and logistics and in metals. And our procurement, marketing and commercial excellence teams are proactively working on offsets to minimize the impact to our P&L. Based on the tariffs enacted to-date and our mitigation actions across the portfolio, we anticipate a minimal impact to our overall business results in 2018. But this is a very dynamic situation that changes by the day, as further evidenced by this morning's headlines and we're giving it substantial focus."

Whirlpool

"Since mid-May, a number of elements in the macro environment worsened significantly. In addition to continued raw material inflation, we experienced a temporary, but significant decline in U.S. industry demands, headwinds related to U.S. tariffs as well as the Brazilian trucker strike and currency fluctuations in Russia and Latin America. While these macro challenges impacted our results negatively, the actions we put in place over the past few quarters, including cost-based price increases and targeted cost reduction throughout the world, enabled us to largely offset these challenges."

3M

"First, the steel and aluminum under the National Security Act and that impact as well as the Section 301 List 1. Those two that have already been enacted we see having a fairly immaterial impact on us. We estimate that to be approximately $10 million, or $0.01 a share, on an annualized basis, the direct and indirect impact of those tariffs. We are actively monitoring and assessing the potential impact from Section 301 List 2 and List 3, if those were implemented and any potential retaliation that could occur with those. And we're prepared to act with sourcing changes, supply changes, and pricing changes if enacted."

General Electric

"If you go and look at the actual tariffs, the $50 billion that are announced and implemented and $200 billion announced but not implemented yet, I'd say we look at it on a gross and a net basis. So it could be $300 million to $400 million at a gross level before any mitigating factors are taken there and there are some significant mitigating factors ... we are a company that's built for fair and open trade. That's obviously a subject of debate and discussion. I think that's what you're seeing right now. We're supportive of fair and open trade. We have a massively global business in every sense, both with the customers, supply chains, everything. And our view right now is we hope and we expect that ultimately these matters reach a sensible, negotiated conclusion."

Nucor

"The U.S. steel market is also benefiting from a reduction in unfairly traded imports entering our country as a result of years of successful trade cases, and the broad-based tariffs imposed on the Section 232. Imports are down more than 7% through the first half of 2018. With all tariffs going into effect in June, we expect this trend to continue. The tariffs send a clear message that the U.S. is done asking nicely for compliance with the rules of trade and is serious about demanding changes in the trade practices of other countries."

Hasbro

"We've been working with and talking to the administration and our congressional delegations to ensure we're communicating just how terrible an impact ongoing tariff or trade war would be. Thus far, we've only seen non-material changes to the tariff schemes of other countries that don't really impact our business. Our toy business has not been part of the 303 designation that is currently been put in place, but we continue to monitor the situation and we continue to talk and firmly believe in a free trade environment as the best course for our company and for the industry."

CSX

"In terms of the specific impacts on CSX today, from any kind of tariff activity, clearly, first was steel. And from a steel standpoint, both finished steel out and ore business in, we have seen some positive as a result of the U.S. steel manufacturers kicking-off production."

Comerica

"I do think that tariffs and trade-related issues, especially given the markets that we're in — Michigan, California and Texas — all who have some economic reliance on trade and some of the industry verticals that we operate in. Given that, I would say that is probably the primary concern that we're hearing from customers right now so that's I think factored into somewhat of our more moderate view on a go-forward basis. But I do want to emphasize that part of that moderate view as well is just the seasonality that we see especially in the third quarter in Middle Market."

Prologis

"What we hear from our customers so far is that they're moving forward with their growth plans and we have yet to see any change in sentiment or decision making on the ground. We remain cautiously optimistic as the vast majority of our portfolio is located in large consumption markets including a significant focus on city distribution and Last Touch delivery. However, escalating trade tensions are a negative for the global economy and akin to attacks on consumers. If today's political rhetoric intensifies and translates into actual protectionist policies, it will be a negative for all businesses in the U.S. and abroad including ours."

W.W. Grainger

"We expect that we will see some supplier inflation related to tariffs in the second half, and we are confident in our ability to pass on price increases. I think it's helpful to point out that the current market dynamic is similar to past periods of inflation. Grainger has historically done well in managing cost and getting price realization through these periods."

Kinder Morgan

"The steel tariffs are enough to make us spend some extra time to make sure we've got a clear supply chain that gets that pipe to us at a predictable price and on time. And so it has an effect. It's created uncertainty. There's no question about it. And so it's an uncertainty that we are actively managing and working on."

Danaher

"We don't feel that we're in the crosshairs of what they're really going after, but — and in fact there is no one business at Danaher that has a significant impact, but it's a bunch of little impact across all the businesses and that adds up to that roughly sort of $0.01 a quarter impact."

The Travelers Company

"Tariffs presumably would impact the inputs that go into loss costs as there are a lot of things by the way that impact the way we think about loss costs. I think on generally we would look at that as affecting short-term lines and things that we could react to. So we don't look at it and there's no sort of outsized expectations here but we're watching it."

Dover

"Parsing that out is relatively difficult. We are keeping a close look at our exposure to China in terms of our revenue base, clearly. And not only our exposure from a revenue point of view, but also the mismatch between what we make in China and sell into China versus what we import/export. So we're running the traps on all of that."

Genuine Parts

"We absolutely have had conversations with our suppliers. They're ongoing. We've got a team that's very involved with this. And we would be looking at any increases, whether it's raw materials, freight, interest rates, tariffs, we're looking at it very broadly. We've got teams in place that are working with our global sourcing offices. We've got modeling going on. We're going to use a lot of database negotiations with our suppliers. But at the end of the day, it's going to be something that we pass along to the customer."

PPG Industries

"In particular, we are closely monitoring our business in China for any possible impacts. Currently, the new tariffs are starting to add some modest cost to our raw materials. Based on the strength in the U.S. dollar in second quarter, we expect foreign currency exchange rates to have an unfavorable impact to our sales in the third quarter. Based on current rates, the unfavorable impact is expected to be between $60 million to $80 million for the third quarter."

Intuitive Surgical

"The tariff situation is, obviously, dynamic. The first round of tariffs that have been imposed do impact some of the components that our suppliers use to supply us. We're studying that as we speak. We think that the estimated impact will be modest in terms of the increase in product cost for our systems. That's not a cost or a level that we're going to pass any of those costs on to customers at this point in time."

Cintas

"From a direct standpoint, we have certainly had some impact like hangers. But overall, it has not been significant. From an indirect standpoint — and when I say indirect, I mean from our vendors — it remains to be seen how they will be impacted and how that might in turn impact us. We're certainly keeping our eyes on that. But we need a little bit more time for that to play out. From a customer perspective, too early to see much of an impact."

Stanley Black & Decker

"We currently estimate the impact of tariffs to be a 2018 headwind of approximately $35 million. This reflects the impact of Section 232 tariffs on steel and aluminum, as well as the initial $34 billion of Section 301 tariffs on componentry and some finished goods. We have initiated price increases for these implemented tariffs and look to further mitigate the remaining impact via the formal exclusion process where applicable ... Prior to mitigating actions, we estimate the annual impact to be approximately $70 million to $80 million. Therefore, if you assume, and it is an assumption, a September 1 implementation, the 2018 impact could be approximately $25 million."

Illinois Tool Works

"As many of you know, our model is to source and produce where we sell. And this approach helps significantly mitigate the risk associated with tariffs. By our estimate, the impact of tariffs represent about 10% to 15% of our total projected cost inflation in 2018. In addition, only 2% of ITW's material spend is sourced from China. Our produce where we sell model and the very limited cross border movement of raw materials and products certainly helps mitigate the impact from tariffs."

UTX

"There are some risks that we need to watch, particularly in terms of tariffs and their impact on product cost. Based on what has been enacted so far, again this is just the first round of tariffs, the near-term impact to UTC appears to be relatively modest. We'll say about $0.05 a share and that $0.05 is included in our revised EPS guidance."

TE Connectivity

"For those products that are impacted, we're committed to working closely with our customers to minimize the impact and we are proactively looking at a combination of actions including further optimizing current supply chains, continuing to leverage our global manufacturing footprint and in some cases, implementing surcharges to customers. I would like to reiterate that, as a global company, TE is a proponent of free and open trade, tariffs and restricted trade policies create friction, uncertainty and added cost for businesses engaged in global markets."

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