Tariffs shock could hit Corporate America harder than COVID-19

The recent upheaval in American financial markets has drawn striking parallels to the chaos of spring 2020, when the COVID-19 pandemic sent shockwaves through the global economy. The VIX index, a measure of stock market volatility, has again surged past 40—an infrequent occurrence that signals intense market stress. Just as it did during the pandemic, oil prices have tumbled, and consumer sentiment in the US has plummeted with one stark difference: The catalyst is not a virus, but Donald Trump's aggressive trade policies.

These, particularly targeting China, have triggered a wave of economic uncertainty that some Wall Street observers describe as “covid plus plus.” According to an article by The Economist, Trump’s tariff-heavy approach to trade has led to widespread disruption in global supply chains and corporate strategy. Tariffs now exceed 100% on many goods exchanged between the US and China, effectively placing the two largest economies in a state of economic quarantine.

The unpredictability of Trump’s trade decisions, from day-to-day reversals to sudden announcements—such as his brief suggestion of taxing foreign-made films—has injected pandemic-like instability into the business environment. The result has been a rollercoaster for stock prices, as seen in the temporary sell-off of Disney and Netflix shares.

The impact on corporate America is already significant, with the article's authors warning that it could be longer lasting than that of the pandemic. While first-quarter earnings remain robust, the outlook for the remainder of the year is bleak. Forecasts for revenue, capital expenditure, and profits have all been revised downward. Since January, consensus earnings estimates for the S&P 500 have dropped by 5% for Q2, 4% for Q3, and 2% for Q4. More alarming is the re-emergence of a trend from 2020: companies are again withdrawing guidance altogether. UPS, Ford, General Motors, and several airlines have suspended their full-year forecasts, citing the uncertainty created by the current trade environment.

The article points out that a mere 17% of large companies have offered second-quarter profit guidance—an all-time low apart from 2020. Some, like pharmaceutical giant AbbVie and industrial conglomerate 3M, issued partial guidance while explicitly excluding tariff impacts. Meanwhile, Goldman Sachs reports that 25% of S&P 500 firms have mentioned “recession” in recent earnings calls, compared to one in three during the early pandemic months and just one in 50 the previous quarter. This rapid shift in tone underscores how quickly business confidence has eroded.

Despite a brief recovery in equity markets following Trump’s 90-day pause on tariffs and the announcement of renewed US-China trade talks, deeper concerns remain. Even if some tariffs are eventually rolled back, the lasting damage lies in the uncertainty and trade fragmentation they’ve introduced. These dynamics threaten to become a chronic drag on US business performance—akin to what Brexit has done to the UK economy.

According to a recent working paper by economist Nicholas Bloom that is cited in the article, Brexit’s long-term economic toll has been significant, with productivity down 3%, business investment reduced by 12–20%, and GDP shrunk by 6–9%. If similar effects materialize in the US, the consequences for American industry could be severe. The article warns that executives hoping for a return to pre-tariff normalcy are misguided. Rather than looking back at the pandemic for lessons, they should consult their British counterparts about the persistent weight of policy-induced economic fragmentation.

The authors warn that Trump’s erratic trade regime poses a structural risk to American business that may prove more lasting than COVID-19. With investor confidence shaken and companies again flying blind, the current volatility may be less a temporary shock than the beginning of a new, more uncertain era.

By Nazrin Sadigova