First "Post-Tariff War" Earnings Season Shows Resilient Performance Despite Uncertain Outlook

Donald Trump, the 47th president of the United States, has been in office for six months. Following negotiations with various countries, the details of "reciprocal tariff" policies have been gradually implemented, including a 55 per cent tariff on China and tariffs on automobiles and other goods imported to the US. The US Treasury Department's monthly fiscal report indicates that tariffs have become America's fourth-largest source of revenue.

The earnings season is approaching over the next two months, with companies such as Apple and Walmart set to announce results on July 31 and August 21 respectively. Vincent Fung, guest host of the online programme "Planet Critical", analysed several companies' performance and Federal Reserve meeting minutes on July 15, noting that tariff policies have had limited impact on US retail performance to date. However, economic uncertainty persists based on Fed meeting records.

Tariff Policy's Two Phases: Focus on Impact of Tariffs on "Elasticity"

Fung outlined two phases of tariff policy since Donald Trump took office. First, the "issues and industry period" from February to March this year, when tariffs were imposed to address specific issues, such as additional taxes on China over fentanyl inflows and extra tariffs on Canada and Mexico over illegal border crossings. Second, the "post-issues period" from April to present, when US tariffs primarily aimed to reduce trade deficits and attract production chains back to or relocate to American soil. This period is characterised by "everyone gets a share, no one misses out".

Fung cited a report from the Center for Strategic and International Studies (CSIS) indicating that US "reciprocal tariff" rates are calculated based on the following formula:

Trade Surplus ÷ (Total Imports × ε × φ)

Where: ε = –4, assumed US import demand elasticity φ = 0.25, assumed tariff-to-price pass-through ratio

Fung noted that how sensitive American consumers are to imported goods prices and how much of export tariffs are ultimately passed on to consumers are key policy considerations. Analysis of various companies' earnings performance suggests tariffs have had minimal impact on US retail.

Earnings Season Arrives with Stable Retail Performance

Apple is set to announce results on July 31. Fung cited Foxconn's 15.8 per cent second-quarter growth this year, noting: "Apple and Foxconn are related companies, so we can imagine Apple's upcoming earnings should be OK, seemingly not significantly affected by global supply chain and tariff issues." He also referenced Marketwatch data showing Walmart's average EPS forecast is close to the previous quarter, suggesting minimal impact from tariff issues.

General Motors also announced results on July 1, with second-quarter 2025 sales rising 7 per cent and first-half growth totalling 12 per cent. Fung concluded: "Summarising various companies' second-quarter 2025 earnings, they seem largely unaffected by tariff issues and even performed quite well. Therefore, tariff price pass-through and impact on some companies appears limited."

Fed Meeting Minutes Released Amid Economic Uncertainty

Fung referenced June 2025 Federal Reserve meeting minutes, citing GDP, unemployment rate and PCE data: "We clearly see the US economy slowing slightly. Under the premise of tariff issues, forecasts for next year are slightly more pessimistic." He further referenced the dot plot, noting "some members believe inflation will rise, requiring interest rates to be raised to the 4.25 to 4.5 per cent range, while other members think rates should remain in the 3.75 to 4 per cent range." This shows divided opinions, with "even Fed members having question marks about the economic outlook." Economic uncertainty has therefore increased.

[1] Editor's note: This article was written on July 22. Apple will announce second-quarter 2025 results on July 31, and related data can be further observed at that time.