Sam Trethewey: Milford Asset Management Portfolio Manager on the Trump tariffs starting to impact corporate earnings

US earnings season has started up again - and new reports indicate Donald Trump's tariffs are starting to bite.

Companies across the US have reported shipping from China has taken a significant dip - the biggest reported since the Covid-19 pandemic.

Milford Asset Management's Sam Trethewey explains further.

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Episode Transcript

Speaker 1 (00:00):
Time to chicken on the market. Samtrathuy is from Milford
Asset Management.

Speaker 2 (00:03):
Hey, Sam, good evening, Heather.

Speaker 1 (00:05):
Okay, Sam. So, we're starting to see the signs that
Trump's tariffs are impacting the corporate earnings and whatnot. What
are you seeing coming through? What are the initial impacts?

Speaker 2 (00:13):
Yes, we certainly are. I think there's indications both locally
and from the large US listed companies that these tariffs
are real and they're starting to buy it. So the
current earning season underway in the US has been dominated
by a few concerns from a pretty diverse list of
companies that these tariffs are coming through. It's the first
time that many of these businesses have spoken publicly since

(00:35):
Trump's Liberation Day. So to give you a flavor of
it at the very headline level, the port of Los
Angeles was out overnight, and that's the busiest port in
the US, indicating that pandemic style shipping issues are coming back.
So imports from China down thirty percent in the past
week or so as many retailers ground to a halt,
and it's a matter of weeks before inventory starts to

(00:56):
inty out on many shelves across the US. Else Where
you've got the likes of Delivery Giant or courier ups
indicating that it's going to cut twenty thousand jobs to
lower costs in response. And more broadly, it's a variety
of companies from airlines to large car manufacturers having to
either slash or pull back their outlook statements for the
air ahead. So that's globally. Locally, our companies haven't been

(01:19):
immune either. Those with material US exposures have also reported impact.
So at the very pointing end of it, caravan operator
Tourism Holdings indicated in a recent update a sharp drop
of over fifty percent and inbound bookings for its US
business and elsewhere, Wind Exported Delegate signaled that there's real
uncertainty and it's forward orders from the US distributors. So

(01:42):
tariffs are becoming real and are beginning to impact earnings.

Speaker 1 (01:45):
And so how is this changing what companies say about
their outlook?

Speaker 2 (01:49):
What is driving I think the large US companies to
really slash or walk away from their guidance or the
typical outlook statement is the real uncertainty around the situation.
So these management teams are sitting they're either seeing very
weak demand all of a sudden turn up or having
to put through very material price likes to their products
and wondering what's that going to do to consumer demand.
So with their prior outlock comments unlikely reflecting anything like

(02:14):
what has played out in that announcement earlier this month
on Liberation Day, it is really causing that uncertainty. So
at the extreme end of it, as an example, you've
got the US airline industry, and demand in that sector
has been very quick to respond. So every major US
airline Delta, American Airlines, etc. Has pulled guidance and in
the case of United they have provided a recession scenario

(02:36):
where it's consistent with very sharp weakening demand for domestically
to travel. So ultimately huge uncertainty. No one has a
clear view of where we're going to end up, and
it's delaying businesses making decisions to see how the situation
plays out.

Speaker 1 (02:50):
Okay, So Sam put this all together, how do you
think the market is interpreting the weekend earnings? Because we
had a decent recovery in the last week or so,
haven't we.

Speaker 2 (02:57):
That's right, Yes, certainly the market has recovered quite material
early in the past week after that initial tariff shock
at the extend of the tariffs earlier in the month.
So I think it's fair to say the market is
taking a glass hufful approach to earnings at this stage,
so reflecting essentially that it hopes trade deals will be
done quickly and the impacts that we are seeing coming
through at the moment, we will be pretty short term live.

(03:17):
So if you look at the S and P five
hundred index, the headline indicts in the US is an
indication it is not far below the level it was
prior to that Liberation Day tariff announcement. Its roughly two
percent below that level. So the risk is really that
Trump and his negotiation team cannot get the appropriate deals
done quickly enough and the consumers we'll have to will
continue to pull back and hence the outlet for corporatetings

(03:39):
continues to weekend. So hopefully a solution is found soon.

Speaker 1 (03:42):
Brilliant stuff, Sam, Thank you as always appreciate it. Samra three.
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