Earnings growth estimates have come down drastically since the beginning of the year, when many investors were expecting a big year for the U.S. economy.
At the start of 2019, analysts estimated S&P 500 profit growth for the year would be around 7.6%, according to FactSet. That number is now 2.3%, as the U.S.-China trade war has weighed on business sentiment.
This 5.3 percentage point drop in estimates is the biggest decline in three years, since 2016 when estimates fell from 7.8% to 1.3%, FactSet data shows.
Economic uncertainty reigns as the trade war between the U.S. and China has placed increasing strain on the global economy, prompting policymakers to respond with interest rate cuts and stimulus measures to bolster growth.
The dispute has weighed on businesses as a tit-for-tat tariff war has been going on for more than a year. Both countries slapped new tariffs on each other goods last week and Wall Street is worried that the levies will seep into earnings growth.
"Many U.S. and China companies have absorbed the cost of the past year's tariffs, but as some of these tariffs are scheduled to reach 30%, we expect a stronger negative impact on corporate earnings," Darrell Cronk, chief investment officer at Wells Fargo Investment Institute, said in a note to clients.
"There are global implications too," he added. "Trade is needed for global manufacturing; manufacturing needed to generate company earnings; earnings are needed to drive hiring and capital spending."
Lower corporate profits also prevent the stock market from going up, Matt Maley, Miller Tabak managing director and chief market strategist, told CNBC on Wednesday.
"The economy is slowing even though it may not go to recession and earnings growth is grinding to a halt, although not gone negative yet. It's hard for the market to rally a whole lot from here," Maley said.
— CNBC's Yun Li contributed to this report.