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Trade war shock hits US companies

3 20
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Trade war shock hits US companies

AMERICAN COMPANIES ARE WARNING of multibillion-dollar setbacks and extreme uncertainty over the trade war with China as earnings season gets underway.

United Airlines gave two financial forecasts, saying it’s “impossible to predict” whether the U.S. might slide into a recession amid the tit-for-tat tariffs.

Johnson & Johnson CEO Joaquin Duato warned the trade war may disrupt the drug supply chain as the administration considers new tariffs on pharmaceuticals.

Treasury Secretary Scott Bessent said in an interview with Yahoo Finance that CEOs should stop worrying.

"We're going to have a lot more clarity on the way forward over the next 90 days," Bessent said.

 

CHIPMAKERS TAKE A HIT

U.S.-based artificial intelligence chipmakers are taking massive hits over a new Trump administration rule meant to keep China from building a supercomputer.

Nvidia’s stock plunged nearly 7 percent Wednesday after the company announced it would take a $5.5 billion quarter charge tied to its chip exports to China. The California-based company revealed in a filing that the U.S. government will require it to obtain a license to export some chips due to new restrictions.

Similarly, Advanced Micro Devices said it would incur expenses of $800 million due to the new export control licensing requirements.

The Trump rule has some bipartisan support. The Hill’s Miranda Nazzaro reports:

“Sen. Elizabeth Warren (D-Mass.), ranking member of the Senate Committee on Banking, Housing and Urban Affairs, wrote to Commerce Secretary Howard Lutnick to push for restrictions on exports of the H20 chip and others to China. She argued Nvidia’s continued export of the chip will work against Trump’s goal of bringing manufacturing to the United States.”

The stock indices continued their recent wild swings with a drop on Wednesday, led by a tech sector sell-off.

 

POWELL WARNS OF INFLATION, SLOWER GROWTH

Federal Reserve Chairman Jerome Powell said Wednesday in a speech at the central bank that he’s monitoring potential inflationary and growth pressures on the economy due to the trade war.

"Tariffs are highly likely to generate at least a temporary rise in inflation,” Powell said.

"The level of the tariff increases announced so far is significantly larger than anticipated,” he added. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”

The World Trade Organization (WTO) called the global trade war a “crisis” and warned of economic disaster if “the situation deteriorates.”

“Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity,” said WTO chief economist Ralph Ossa.

 

💡Perspectives:

• Racket: A reckoning is coming for the private equity........

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