Data shows Trump's trade war is hurting US manufacturers. Here's what 4 companies had to say about the negative impact.

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Data shows Trump's trade war is hurting US manufacturers. Here's what 4 companies had to say about the negative impact.

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Mike Segar/Reuters

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  • Concerns around President Trump's trade war and slowing Chinese growth are continuing to pop up during earnings calls with corporate executives.
  • A large concentration of negative mentions can be found among industrials and materials companies.
  • The impact is also being felt in the numbers: Earnings results within the materials sector are coming in 5% below consensus targets, according to Bank of America Merrill Lynch data.
  • Visit the Markets Insider homepage for more stories.

The effects of President Trump's trade war with China are reverberating through industrials and materials companies.

Firms within the two sectors have mentioned the negative impacts of tariffs and a slowing Chinese economy more frequently throughout the most recent earnings season, compared to the first quarter of 2019, according to a report from Bank of America Merrill Lynch.

"Industrials and materials continued to cite weakness in their end markets on slowing business spending and tariffs," BAML said of second-quarter earnings reports.

About three-fourths of industrial stocks in the S&P 500 have reported second financial results, and so far earnings are coming in just 2% above the consensus estimates, the firm said. Materials companies are faring worse, with earnings tracking 5% below consensus expectations.

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BAML also said Trump's 25% tariff increase in May could be driving the increased frequency of negative tones around China within earnings calls.

Out of the 45 companies that mentioned China trends, almost 50% were negative comments, compared to 28% in the first quarter.

Here are four of the companies that mentioned concerns about the trade war and slowing growth in China during their second-quarter earnings calls:

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Honeywell International

Honeywell International

Honeywell, an industrials conglomerate with business lines in aerospace, chemicals, and manufacturing, has significant operations and sales in China.

Despite reporting a backlog and increase in orders in China for its Universal Oil Products business in the second quarter, Gregory Peter Lewis, the senior vice president and chief financial officer of Honeywell, still counted slowing growth in the country as a major concern in the economic backdrop.

"We are taking the cautious view on the short-cycle growth as many of the macro signals, the China GDP, US-China trade tensions and Brexit, just to name a few, are still clouding the economic outlook," Lewis said. "We think it's prudent to plan conservatively given the uncertainties."

Dow Inc.

Dow Inc.

Last week, Dow posted second-quarter revenue of $11 billion, representing a 14% drop from the same period last year. The company said it expects to see trade and geopolitical uncertainties affect the buying patterns of its customers.

"The macro environment is cautious largely driven by geopolitical volatility and prolonged trade negotiations which continue today," James Fitterling, the chief executive officer of Dow Inc. said during an earnings call. "We still see the global economy expanding, but the pace of growth is slower particularly in Europe and in China."

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3M

3M

3M, which manufacturers and supplies products for a wide variety of industries, saw its growth in China fall by 0.80% in the second quarter. Growing sales in 3M's health care, transportation, and electronics segments were offset by declines in demand for industrial, safety, and consumer products.

"For the year, we now expect organic growth in China to be down low to mid-single digits versus a prior expectation of flat as we continue to experience challenging end market conditions, particularly in the electronics and automotive industries," Nicholas C. Gangestad, the senior vice president and chief financial officer said.

Caterpillar

Caterpillar

Caterpillar's second-quarter earnings signaled slowing growth in China amid the trade war as consolidated sales and revenue fell 7% in the Asia Pacific region from the same period last year. The company also saw manufacturing costs increase $328 million, with tariffs accounting for $70 million of the additional expenses.

"We expect continued pressure from competitive pricing in China, partly offset by growth in other areas in Asia Pacific," D. James Umpleby, the chief executive officer said during the company's earnings call.

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