Barclays: Tariffs may cut S&P 500 earnings by 2.8%, hit materials, consumer sectors

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Tariffs also could increase inflation measures in 2025, analysts estimate

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Investors recall 2018 trade war impacts, defensive stocks outperformed, tech underperformed

By Lewis Krauskopf

NEW YORK, Dec 11 (Reuters) - The U.S. stock market welcomed Donald Trump's victory in the 2024 presidential election, but turbulence may lie ahead if the president-elect makes good on his tariff threats.


Much about the incoming administration's policies remains uncertain, including whether Trump's renewed threats last month to impose tariffs on China, Canada, Mexico and other U.S. trading partners are opening salvos to negotiating other issues, such as border security.


The timing and extent of new tariffs are also unclear, and the severity of the tariffs' impact on the U.S. could depend on whether targeted countries respond with measures of their own.

Economists' worst-case forecasts, however, paint a worrisome picture.

One extreme long-term scenario run by Oxford Economics showed world trade shrinking as much as 10% and U.S. economic growth about 1% below current expectations. Tariffs will hit corporate earnings, particularly in the retail, industrials and materials sectors, while stoking inflation, other forecasts show.


"Tariffs are basically bad for the economy," said David Kelly, chief global strategist at JP Morgan Asset Management. "You can actually have a stagflationary effect of both increasing inflation pressures and reducing economic growth at the same time."

Trump's renewed threats caused waves in foreign currency markets, but U.S. stocks largely shrugged them off as the market extended this year's more than 26% rally, which has taken the S&P 500 to record highs.

Barclays strategists estimated that proposed tariffs on Canada, Mexico and China - and any retaliatory actions - could drag S&P 500 earnings down 2.8%.

The materials and consumer discretionary sectors could face double-digit earnings declines, due to their significant supply and production presence in Mexico and Canada, Barclays said.

Retaliatory tariffs by targeted countries would exacerbate any earnings fallout.

BofA Global Research expects a 1% hit to S&P 500 earnings if tariffs on China double to 40% while they rise to around 8% for the rest of the world, excluding Mexico and Canada. But with retaliatory tariffs, which hurt foreign sales, the earnings hit would rise to 5%, the bank's strategists wrote.



Tariffs may also increase the core measure of the personal consumption expenditures price index, a widely used inflation gauge, to around 2.5% from 2.3% next year, according to Deutsche Bank economists.

The Trump campaign did not immediately respond to a request for comment.

LOOKING TO TRUMP 1.0

Trump has

called tariffs

"the most beautiful word in the world" and argued that his plans would rebuild the U.S. manufacturing base, grow U.S. jobs and incomes and earn trillions of dollars in federal revenues over 10 years.

Some investors are reviewing Trump's tariffs during his first term for insight into their potential effect this time around.

The materials and industrial sectors were the market's worst performers during a U.S.-China trade war in 2018, both falling more than 5% over a nine-month period, according to RBC Capital Markets.

Defensive stocks, popular during uncertain times, posted the strongest returns, with utilities and real estate both rising more than 10%, the bank said.

RBC's strategists earlier this month downgraded the materials sector to "market weight" from "overweight," citing its poor performance in that 2018 period as one factor. The sector has fallen 3% since Trump's Nov. 5 election victory, versus a 4% gain for the S&P 500 over that time.



The tech sector tended to underperform on days of announced U.S. tariffs or China retaliations in 2018 and 2019, with particular weakness in hardware and semiconductors, a Citi analysis showed.

"However, given they remain at the forefront of the AI (artificial intelligence) story and may benefit from a front-loading of orders if tariffs are announced, we are less concerned on the immediate risk," Citi strategists said in a recent report.

Higher tariffs on China could put retailers, industrial companies and tech hardware firms in the crosshairs, said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management. Popular U.S. brands such as Apple, Starbucks and Nike could face retaliatory measures, Lefkowitz said.


Automakers manufacturing in Canada and Mexico could feel the heat from any tariffs, Lefkowitz said. General Motors and other auto shares sold off after Trump's tariff pledges last month.

Bullish investors point to various parts of Trump's economic platform, including tax cuts and deregulation, that could potentially offset tariffs. Trump's choice of prominent investor Scott Bessent to be U.S. Treasury Secretary, essentially the highest-ranking U.S. economic official, was also well received by Wall Street.


Trump has also historically measured his success at least in part by the strength of the stock market, Lefkowitz said. That could make him wary of implementing tariffs to a degree that would badly hurt stocks, Lefkowitz said.

"They are trying to boost U.S. growth," Lefkowitz said. "Tariffs would end up reducing it and Trump tends to focus on how the market is performing. For that reason, the market has been downplaying so far what we have heard on tariffs." (Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Richard Chang)

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Adam Bandt said people 'can make their own judgment' about him enjoying an exclusive and discretionary perk from Qantas during a tense exchange with a journalist live on radio.



The Greens leader has been outed as a member of the Qantas Chairman's Lounge, an invitation-only set of catered waiting areas and services handed out by the airline in what has been called 'Australia's most exclusive club'.

Mr Bandt was challenged on Monday by ABC Radio National stand-in host Steve Cannane that he was 'enjoying free hospitality from a company that has illegally sacked hundreds of workers'.

Mr Bandt replied: 'And I'll declare that and people can make their own judgement about what they think about that.'

Cannane was referring to the Federal Court's ruling that Qantas illegally sacked 1,700 workers at the start of the Covid pandemic in a case brought by Transport Workers Union. 

Commenting on the sacking in June of 2020, Mr Bandt called it a 'devastating day for thousands of Qantas workers & their families' in a Facebook post. 'We're thinking of you,' he wrote.

Cannane challenged Mr Bandt further saying: 'You don't think you should be a little purer on this and just not take their (Qantas's) hospitality?'

Mr Bandt said he always made declarations about matters such as this and argued that the party's policies to tax big corporations heavily show the perks were not impacting the Greens.  




Greens leader Adam Bandt said people 'can make their own judgment' about him enjoying an exclusive and discretionary perk from Qantas





Mr Bandt has been outed as a member of the Qantas Chairman's Lounge, an invitation only set of catered waiting areas and services handed out by the airline that has been called 'Australia's most exclusive club'



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How Greens leader Adam Bandt spent thousands on private jet flights while lecturing YOU about climate change


Mr Bandt was spotted in September flying business class from Melbourne to Canberra seated next to Senator Jacqui Lambie.

Albanese government ministers Tim Watts and Catherine King were on the same flight but were with the masses in economy class.

It has been previously reported that Mr Bandt opts to frequently fly business despite his party's core policy of cutting C02 emissions. 

Flying business class emits about three times as much carbon as economy class because the seats take up more room and more of them are empty, according to a World Bank study. 

Fellow Greens MP Max Chandler-Mather last year said he had shunned a Chairman's Lounge membership and refuses to travel business class. 

Earlier this year Mr Bandt's flying habits led to controversy.




Mr Bandt's flying habits have been a previous source of controversy after it was revealed he frequently opts for business class and has even taken private jets to election events

Mr Bandt used two private jets during the 2022 federal election campaign, landing tax payers with the $23,000 bill. 

One flight was between Queensland regional centres Townsville and Rockhampton on March 7 but he also boarded a $15,000 private plane along the well-travelled Brisbane to Canberra route to attend his party's election campaign launch.

Mr Bandt isn't the only politician in the hot seat with Prime Minister Anthony Albanese being asked if he has included both his son and partner as 'plus one' Chairman's Club members.

He is also being asked about free flight upgrades including an international one he is alleged to have received from Qantas in new book The Chairman's Lounge authored by former Australian Financial Review columnist Joe Aston.


The Greens are licking their electoral wounds after the Queensland state poll, where they are battling to hold onto their two seats after stating they aimed to triple their representation in parliament.

With 72 per cent of the vote counted they appear to have retained the Brisbane seat of Maiwar but suffered a 4.6 per cent swing to the ALP.

However, they remain behind South Brisbane, which has seen a m***ve 12.4 per cent swing to Labor with 64 per cent of votes counted. 

WHAT IS THE QANTAS CHAIRMAN'S CLUB?

The Qantas Chairman's Lounge is an invitation-only club approved by the company chairman, with the guest list a closely-guarded secret.

It has been dubbed 'the most exclusive club in the country' and comes with a distinct black card.

Members include senior-ranking MPs including ministers, state premiers and the Prime Minister, leaders of major unions and sporting groups, Qantas ambassadors, selected A-list celebrities, major corporate figures and high-profile media personalities.

The clubs can be found in Sydney, Melbourne, Canberra, Brisbane, Perth and Adelaide but are not signed, you have to know where to look.

Inside you will find expensive wood and brass furnishings, wool carpet and marble flooring all bathed in natural light. 

Members enjoy fine à la carte dining with a complimentary premium array of beers, spirits and Australian wines. Wine bottles are often given as departing gift

Facilities may also include spas, showers and an assortment of books and magazines.

Members may bring in two guests at a time. 

Lounge attendants personally alert you when your flight is to board and your personal preferences are logged for each flight. Membership also entitles you to first-class facilities at Qantas partner airlines.

Soure: Executive Traveller

 

 

 

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