Companies Talking Frankly About Tariff Worries

In the opening weeks of his second stint in the White House, President Donald Trump has started putting the tariffs he spoke so fondly about on the campaign trail into play. During talks earlier this month on border security with Canada and Mexico, Trump made threats to impose steep tariffs on goods imported to the U.S. from the neighboring nations. On Monday, he enacted a 25% tariff on all steel and aluminum imports into the United States.

Publicly traded companies are bracing for the impact of tariff-induced shocks. For example, Coca-Cola says it will need to look for alternatives to the aluminum cans it imports from Canada. At Ford Motor Co., the automaker’s chief executive is warning that jobs are being put at risk by the Trump administration’s trade policy, including talk of imposing tariffs on cars and components from north and south of the U.S. border.

Meanwhile, in filings with the Securities and Exchange Commission, some issuers are starting to offer details on the risks tariff pose to their businesses. Based on risk-factor disclosures compiled using the Intelligize platform, here are some tariff-related themes from recent corporate filings.

Higher prices

Contrary to Trump’s belief, economists widely agree the burden of paying for tariffs mainly falls on the parties that buy imported goods. Companies are saying as much publicly as they fret over the likelihood of price hikes.

For example, Boardwalk Pipeline Partners, a Houston-based company that stores and transports natural gas, noted in a Form 10-K that the tariffs could affect both the pricing and availability of the materials needed for its construction and development projects. Similarly, Neuronetics Inc. pointed out in a filing that tariffs could “significantly increase” the costs of its supplies. “If we are unable to pass on such costs, it could adversely affect our business, results and prospects,” the Pennsylvania-based company said.

Looming trade wars

Some companies are looking at Trump’s posture on tariffs as a prelude to trade wars as foreign governments retaliate with tariffs of their own. The fears seem particularly acute for companies in which dealings with China are central to their business models.

As an example, biotechnology company Arvinas cited its relationships with suppliers and manufacturers in China as a risk factor going forward: “Trade tensions and conflicts between the United States and China have been escalating in recent years and, as such, we are exposed to the possibility of product supply disruption and increased costs and expenses in the event of changes to the laws, rules, regulations and policies of the governments of the United States or China, or due to geopolitical unrest and unstable economic conditions.”

Inflation

Rexford Industrial Realty Inc. directly mentioned Trump’s trade policies as a risk to its business and tied them to broader worries about heightened inflation. The industrial REIT pointed out that the fallout from inflationary pricing could hamstring its building projects by raising costs of everything from materials to labor. Notably, “no assurance can be given that our budget contingencies would accurately account for potential construction cost increases given the current level of inflation and variety of contributing factors, including the imposition of new or increased tariffs,” according to Rexford Industrial.