The growing trade conflict between the United States and China is starting to weigh on the global economy. This is because many of the companies who rely on this trade relationship also do business in other parts of the world.
Stanley Black & Decker, for example, lost $370 million from tariffs imposed on Chinese goods by the United States. Foreign-exchange headwinds and inflation also contributed, the industrial tools and hardware giant saw an overall stock loss of nearly 30 percent.
But every business is going to suffer in terms of their bottom lines from the new tit-for-tat tariffs imposed by the United States. Also, economists warn that this will have a ripple effect across the globe. And, of course, the outlook is even worse because there is no indication that it will change any time soon.
As such, companies are doing everything they can to cut costs and maximize profit margins. Some are simply reducing profit outlook while others are searching for new suppliers that might offer better prices. And some companies are even hoping that their suppliers will absorb a majority of the increased costs from these tariffs.
Indeed, this situation could get more and more dire as treasury yields are also down and oil is under growing pressure. As a matter of fact, benchmark US Treasury 10-year yield slid to its lowest level since late 2017, just last week. And US oil dropped to its worst week in five months, to $58.63 per barrel. With overall global economic data disappointing analysts across the board, many now warn that stocks could continue to falter.
The longer this conflict goes, the harder it is going to get to recover. Last week, for example, Goldman Sachs analysts said that should the United States further threaten new tariffs—on the remaining Chinese imports—it could force the stock market down another 4 percent, at least. Keep in mind that the Dow has been in decline for five straight weeks; this its longest losing streak in more than seven years.
But on top of this, more than 75 percent of Standard & Poors 500 companies have already issued second quarter earnings guidance that came in well below analyst expectations. Guidance came in just above the five-year average of 70 percent. And if this holds, investors can likely expect even more trouble.