What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play

Summary

WSJ What’s News Podcast Summary

Episode: What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Release Date: April 6, 2025
Host: The Wall Street Journal
Guests: Christine Short, Head of Research at Wall Street Horizon (TMX Group)

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Introduction

In this episode of WSJ What’s News, hosted by Alex Osola, the focus centers on the profound impact of President Trump’s new tariff policies on the upcoming earnings season. Co-hosts Telis Demos and Miriam Gottfried, along with guest Christine Short, delve into how these tariffs are reshaping corporate strategies, market reactions, and consumer behavior.

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Tariffs Announcement and Market Reaction

The episode begins with a discussion about the recent and substantial tariff announcements by the Trump administration. Telis Demos highlights the market's intense preoccupation with tariffs, noting a significant market drop of approximately 4% immediately following the announcement (Telis Demos, 06:06).

Key Points:

• Tariff Structure:
  • 10% Flat Tariff: Applied uniformly across all imports.
  • Higher Tariffs for "Bad Actors": Additional duties imposed on specific countries deemed non-compliant.
  • 25% Tariff on Foreign-Made Cars: An unprecedented move targeting the automotive industry specifically.

Miriam Gottfried emphasizes the widespread impact, mentioning that many household products labeled "Made in China" or "Made in Vietnam" will now face increased costs (Miriam Gottfried, 05:08).

Notable Quote:

"We will charge them approximately half of what they are and have been charging us. So the tariffs will be not a full reciprocal."
— Christine Short, 03:33

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Earnings Season Overview

As the first-quarter earnings reports approach, the hosts discuss the anticipation surrounding how companies will navigate the new tariff landscape. The discussion touches on the uncertainty tariffs introduce and the various strategies companies might employ.

Key Points:

• Corporate Guidance: Companies are adjusting their forward-looking statements to account for the increased costs and potential changes in consumer behavior.
• Consumer Price Index (CPI) Update: Next week's CPI report is crucial for understanding how tariffs might be inflating consumer prices, though initial effects may not yet be reflected (Telis Demos, 07:21).

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Industry Impact and Company-Specific Insights

The conversation shifts to specific industries and companies poised to be affected by the tariffs.

Aviation Sector:

• Delta Air Lines: Miriam Gottfried expresses interest in Delta’s performance, especially after the company lowered its guidance due to reduced travel demand.
• Other Airlines: American Airlines and Southwest have also adjusted their forecasts, indicating a broader trend of declining air travel (Miriam Gottfried, 07:58).

Automotive Sector:

• CarMax: Telis Demos points out the potential advantages for used car dealers like CarMax, as tariffs on new cars could drive consumers towards the used car market (Telis Demos, 08:00).
• Major Automakers: Companies like GM, Ford, and Chrysler are facing increased costs from tariffs on imported parts, potentially leading to higher consumer prices and reduced sales (Christine Short, 21:09).

Retail Sector:

• Walmart: Highlighted as a potential beneficiary due to its vast warehousing capabilities and ability to negotiate better terms with suppliers, allowing for some price protection despite increased costs (Christine Short, 27:00).

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Interview with Christine Short

Christine Short provides an in-depth analysis of the upcoming earnings season, focusing on how tariffs are expected to influence corporate earnings and market valuations.

Passing on Tariff Costs:

• Widespread Impact: Over half of S&P 500 companies mentioned tariffs in their Q4 reports, predominantly indicating a negative impact.
• Consumer Price Hikes: Many companies anticipate passing increased costs to consumers, which could squeeze consumer spending (Christine Short, 12:34).

Earnings Guidance:

• Revised Expectations: While S&P 500 earnings per share are expected to increase by 7% year-over-year, analysts have downgraded these estimates from an initial 12% due to tariff uncertainties (Christine Short, 15:19).
• Negative Guidance Trends: A higher-than-average number of companies are issuing negative guidance for Q1, signaling potential challenges ahead (Christine Short, 16:32).

Notable Quote:

"So the tariffs will be not a full reciprocal. I could have done that. Yes, but it would have been tough for a lot of countries. We didn't want to do that."
— Christine Short, 03:33

Sector-Specific Benefits:

• Materials Sector: Companies like US Steel may benefit from reduced competition due to tariffs on imported steel, although supply constraints could limit immediate gains (Christine Short, 25:06).
• Technology Sector: Despite recent setbacks, certain tech companies like Nvidia continue to show strong fundamentals and growth prospects, particularly in AI-related products (Christine Short, 28:46).

Short-Term vs. Long-Term Effects:

• Short-Term: Some companies might experience temporary boosts as consumers rush to purchase before prices rise, benefiting sectors like used cars and essential goods.
• Long-Term: The broader economic impact includes potential recessions, decreased consumer spending, and sustained increases in production costs for affected industries (Christine Short, 24:08).

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Consumer Behavior and Economic Indicators

The hosts discuss how tariffs could alter consumer behavior, with indications that consumers may prioritize essential and lower-cost items over discretionary spending. This shift could have mixed effects across different sectors.

Key Points:

• Essential Goods: Increased tariff costs on necessities like groceries and appliances could lead consumers to adjust their spending habits.
• Discretionary Spending: Sectors reliant on consumer confidence and discretionary income, such as travel and luxury goods, may face significant downturns.

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Conclusion

The episode wraps up by highlighting the complexities introduced by the new tariff policies and their multifaceted impact on various industries and the broader economy. While some sectors may find opportunities amidst the challenges, the overall sentiment remains cautious as companies and consumers navigate this turbulent period.

Final Thoughts: Christine Short underscores the uncertainty surrounding tariffs and their long-term effects, emphasizing the need for investors to closely monitor earnings guidance and company-specific strategies (Christine Short, 29:07).

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For more insights and detailed analysis, visit WSJ.com.

Transcript

[Miriam Gottfried]

Viking committed to exploring the world in comfort.

[Telis Demos]

Journey through the heart of Europe on.

[Miriam Gottfried]

An elegant Viking longship with thoughtful service, cultural enrichment and all inclusive fares.

[Telis Demos]

Discover [e-mail] hey, what's news, listeners?

[Alex Osola]

It's Sunday, April 6th. I'm Alex Osola for the Wall Street Journal. This is what's News Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. This week we're bringing you an episode of Our Sister podcast, WSJ's take on the Week, where co hosts and WSJ reporters Telis Demos and Miriam Gottfried look at the role of the latest tariffs in the coming earnings season. There was only one word that seemed to matter to the markets, this tariffs. But how much will President Trump's new tariffs impact corporate earnings? And how are companies planning their futures around them? WSJ's take on the Week podcast spoke with Christine Short, head of research of Wall Street Horizon, which is part of the financial services company TMX Group. They discuss what tariffs will mean for companies and consumers.

[Telis Demos]

Hey everyone. I'm Telus Demos. I write for The Wall Street Journal's heard on the street. And this is WSJ's take on the Week, the weekly podcast where we give you a leg up on the worlds of money and investing. Each week we bring you conversations with insiders and from inside the Wall Street Journal's newsroom about, well, mostly about tariffs, frankly. Frankly, frankly, we mostly talk about tariffs. I will briefly reintroduce somebody that everybody should be familiar with now, who is Miriam Gottfried, who is on her last guest hosting assignment before Gunjan Banerjee returns. But first in our hearts still, Miriam, welcome again.

[Miriam Gottfried]

It's great to be here, Telus, and I am very excited to talk to you about tariffs again.

[Telis Demos]

Yes, well, this past week there was obviously big, big news in the world of tariffs, the markets obsession. And it was, I mean, quite honestly, it was pretty dramatic. I was like having trouble sleeping last night, just sort of thinking about how to pull it all together on today's podcast. We're recording this on April 3rd. You know, the market has obviously reacted quite strongly, but I think the drama is even beyond, you know, and we'll talk about what's going on with stocks and earnings and things, but I think this is just like a kind of like, it just feels like one of those you read about in your history textbook kind of moments. Right. And regardless of what comes next, it just certainly Seems like this announcement has kind of knocked everybody off their axis a little bit. Miriam, can you take us through exactly what transpired last night? Because I think just setting it up, I think that this was beyond what people were saying. I guess depending on your point of view, best case or worst case scenario for tariffs would be what was ultimately announced was maybe even in excess of those scenarios.

[Miriam Gottfried]

Yeah, I mean, the administration did not hold back. I think there had been a view beforehand that they will either take the across the board tariff approach, one flat rate for every country to pay on imports, or there will be this reciprocal approach where we're trying to bring other countries into parity with what the US has to pay. And in fact, there was both. So we have first a 10% across the board tariff on all imports and then even higher rates on top of that for countries the White House considers to be bad actors on tariffs. And there will also be a 25% duty on all foreign made cars, which was sort of, you know, forecast. We kind of knew that was coming. Let's go to a clip from the announcement.

[Christine Short]

We will charge them approximately half of what they are and have been charging us. So the tariffs will be not a full reciprocal. I could have done that. Yes, but it would have been tough for a lot of countries. We didn't want to do that.

[Miriam Gottfried]

So these are pretty extreme changes. And the market reacted pretty dramatically right afterwards to this news. I mean, there are a lot of different products whose prices will likely be affected by these tariffs.

[Telis Demos]

Yeah. And it seems like, like you said, both things happen. Right. Even countries that have trade, that the US has trade surpluses with will be paying a. I think it's a 10%. 10% is the proposal as it stands now as we record. And then countries that had a trade deficit. It seems like the Journal had a story laying out basically the math. They did, which was like, how big is the trade imbalance with the US Right. How much more do they buy from us? And we buy from them and then taking that amount and I think in some cases, like basically dividing it by two and saying that's going to be the tariff. And so, so, so those add up to big numbers.

[Miriam Gottfried]

Yeah. And that's why Trump positioned these numbers as being kind to other countries. We were being nice to them because we're not doing a full trade deficit. We're taking it and cutting it in half, and then that's what we're charging them. But these are big numbers. These are big numbers and they're, you know, I can't Tell you the number of products in, in my house that say, made in Vietnam, made in China, you know, these are. This is where a lot of our goods come from today.

[Telis Demos]

Yeah. And we can and will have, you know, long discussions about the economics, you know, of these things. You know, there are obviously people on both sides of the issue who feel very strongly that this is the right or wrong way to go about things. But in the meantime, let's talk about what the markets have been doing in reaction to that. And, you know, one thing that the markets have really been struggling with is not even so much what the tariffs are, but just the exact policies, but just that it is. It is done and dusted and in the books. I, perhaps the market now will at least have some certainty that, okay, maybe these tariffs will be slightly different, but that they will be dramatic and significant either way because there are still some exceptions. Right. I think that Canada and Mexico, for now, are not involved in this reciprocal regime. You know, whether or not those things stick around, we'll see. But it does seem like there's at least certainty that they weren't joking when they said that they wanted to do something very significant.

[Christine Short]

Tariffs, right.

[Miriam Gottfried]

Yeah, that's right. I think, I think that's true. And I think what people will look for now is whether some of these individual countries decide to strike deals with the US to try to negotiate these rates down a little bit. I mean, that's what the goal of reciprocal tariffs. Right. Is just try to kind of bring people to the bargaining table and get something out of them. So I wouldn't be surprised if pretty soon we start to see certain countries coming forward with proposals that, you know, might appease the White House and get some of these tariffs to be modified.

[Telis Demos]

Yeah. And so, and so, again, for the, for, for the time being, here we are, you know, speaking the morning after the announcement, and the US Market is down, you know, by. It's down at this very moment by about 4%. We'll see, you know, how that plays out over time. But I think that next week people will be looking for those announcements. There's also the Consumer Price Index update next week. We'll see if there's anything in that report that kind of gives us a little view of, obviously, one of the main concerns about tariffs is that it will raise prices here in the US that we will all be essentially paying for these tariffs if they are passed along to us in the form of higher costs. And so we'll see in the cpi, which obviously will not, you know, include what's happening now.

[Miriam Gottfried]

Right.

[Telis Demos]

It's backwards looking. However, you know, we'll see if, if people have started to, if companies have started to raise prices on things ahead of tariffs maybe as they have tried to buy things up that they want to hoard essentially before the price of them goes up. Right. If you're buying raw materials and things like that, we'll see if those things start to filter through to prices. The most recent inflation reading we had the personal consumption expenditures index. That was pretty hot. So I think people might be a little interested in what goes on with this consumer price index.

[Miriam Gottfried]

Okay, let's move on to the earnings front. The first quarter earnings report season is popping off this coming week.

[Telis Demos]

Miriam, which ones are you going to be watching closely?

[Miriam Gottfried]

You know, I'm really curious about Delta, which already lowered its guidance along with many other airlines. The, you know, the amount that businesses and consumers spend on air travel I think is an indication of their sentiment, their optimism about the future. How much they believe they can, you know, shell out versus how much they have to save just in case things go wrong.

[Telis Demos]

Absolutely. Big consumer read there. And then I think one I'm watching is CarMax. They are the kind of car seller, they sell a lot of used cars. It's going to be super interesting, I think, to see what happens with them. Their stock has been a bit of a roller coaster lately because on the one hand, you know, if you tariff the importation of new cars or new car parts that should, I think a lot of people think make used cars prices go up. Yeah. So in theory that might be good for CarMax. But you know, the, the, in the immediate aftermath of the tariff announcement, their stock was down. So I think it'll be really interesting to see what they say.

[Miriam Gottfried]

That was just everybody selling off autos.

[Telis Demos]

Who knows, sell your winners. You know, maybe that's the old saying goes. So, so it'll be interesting to see what they report and what they say and also how the market reacts to it. But I want to step back a little bit on earnings given the environment that we're talking about here. Obviously we know that there are worries about the economy amidst what's going on with tariffs and frankly other kind of big policy changes. There are recession risks that people are talking about, but that is not the same as saying how are companies themselves actually doing corporate earnings. Because as much as big companies collectively make up our economy, they employ us. We buy stuff from them. Their fates and the economy's fate are not exactly the same. Tariffs could increase costs. Maybe companies pass along those costs to consumers. Maybe some companies raise their prices because other prices are going up and they end up making more money.

[Miriam Gottfried]

That could at least improve profitability in the short term. We don't know.

[Telis Demos]

Absolutely. What if companies lay people off and improve their profitability that way? Right. We could see a struggling economy, but companies doing okay to maybe.

[Miriam Gottfried]

Well, or at least in the short term because I think, you know, consumer spending is still an important part of the economy and as that comes down, that will eventually affect.

[Telis Demos]

Companies need to sell stuff to someone.

[Miriam Gottfried]

Yeah.

[Telis Demos]

Though someone's being consumers. You, me, people.

[Miriam Gottfried]

Exactly.

[Telis Demos]

And then does the market even care? Right. Does the market care about how companies are expected, their earnings are expected to perform? Because really, you know, the market is sort of two things. Right. One, it's a sort of prediction of what company earnings will be and then also how much it values those company earnings and what kind of volatility it expects from those things. So. And there are times when companies have great quarters, they report big positive earnings and then their stock goes down. And that makes our jobs as reporters interesting but also difficult because we have.

[Miriam Gottfried]

To explain it, because we have to.

[Telis Demos]

Explain why that happens. That brings us to our interview this week. We spoke to Christine Short. She is the head of research at Wall Street Horizon, a TMX Group company and she looks at earnings in really a mind boggling level of detail. So she talked to us about what we should expect from earnings season, what impact tariffs could have. We looked at a bunch of different sectors, individual companies. It is a wide ranging conversation and a user guide to the upcoming corporate earnings season. Stick around for that. It's going to come right after the break.

[Christine Short]

I was never really a runner. The way I see running is a gift, especially when you have stage four cancer. I'm Ann. I'm running the Boston Marathon presented by bank of America. I run for Dana Farber Cancer Institute to give people like me a chance to thrive in life even with cancer.

[Telis Demos]

Join bank of America and helping Anne's cause. Give if you can@b of a.com supportann what would you like the power to do? References to charitable organization is not an endorsement by bank of America Corporation. Copyright 2025.

[Miriam Gottfried]

Today in the studio we are joined by Christine Short to talk about first quarter earnings which kick off this coming week. She is the head of research at Wall Street Horizon, a TMX Group company. Christine, welcome.

[Christine Short]

Thank you so much for having me.

[Miriam Gottfried]

So we are about to enter earnings season and tariffs are looming large. What does that mean for corporate earnings? Will some companies be able to pass these tariffs along and what kinds of companies will struggle to do that?

[Christine Short]

Yeah, well, we heard about tariffs a lot in the last quarter in the Q4 reports. Once it was confirmed that President Trump was in office, we started to hear a lot more about companies that how they would be impacted by tariffs, what they would do to either pass those on or move their production facilities. And actually, I will say in Q4 we saw the most tariff mentions even going back to the first Trump administration. So over half ofs and P500 companies mentioned tariffs. Most of those were to a negative degree. And so what most of them are saying is that they will be passing those on to the consumer, which was a bit surprising because some of these big box retailers or these larger, these are the largest companies in the world. Right. But even the likes of Walmart said, look, we're going to try to price protect as much as we can. We are known for value, but. But even though we get two thirds of our goods are made domestically, we're still going to, on that other third, we are still gonna have to raise prices and those will pass on.

[Miriam Gottfried]

So they were basically saying we're powerless against these tariffs. Like even we, these big companies can't really push back that much.

[Christine Short]

Yeah. And the difference being from the first Trump term, the amount of tariffs, there's a higher percentage of tariffs and the timing wasn't a phase in it was like going to happen all at once. And so that was something that companies said they were really going to face challenges with because you can't move your supply chain immediately. Right. That takes years, that takes lots of money. And even the companies that said, like Steve Madden, for example, the shoemaker, said we are going to try to move to some other places that aren't impacted by tariffs, but that's going to cost us a lot of money and that's going to take some time and those costs will get passed down to consumers. So no matter what it was, we almost heard across the board that these S&P 500 companies, if tariffs are implemented, those will have to be passed on.

[Telis Demos]

So obviously we're looking at first quarter results. So these are how companies did in the first three months of the year when tariffs were nascent. Right. They were just beginning. So we might not see an actual earnings hit from even companies that will be dramatically affected. We won't necessarily see it yet. So what kinds of things should we be looking for from earnings reports? You mentioned companies talking about tariffs. Is it forward guidance? What are other things that we might hear or see in earnings reports that will spark the market and move prices.

[Christine Short]

That's a good point. Earnings season's always backwards looking, right. So while we care about the results and stocks will often go up or down depending on whether companies beat or missed, it's really the forward looking guidance that we want to be aware of. Right. Because currently Q1 expectations are quite good. Their S&P 500 earnings per share is expected to increase 7% year over year.

[Telis Demos]

That's a long streak of increases. Right.

[Christine Short]

7Th consecutive quarter revenues a little lighter at 4% and that's the 18th consecutive quarter that we've seen these constituents increase sales. And so neither of those numbers are to sneeze at. I'd say the one sort of worrisome trend is how analysts have ratcheted down specifically on bottom line estimates. That 7% I just mentioned back at the beginning of the year was expected to be 12%.

[Telis Demos]

Interesting.

[Christine Short]

So they've come back in, they've pushed estimates down mostly for the first half of the year because of this uncertainty and they're pushing most of the corporate earnings growth into the second half of the year. But again, I've covered earnings seasons through the COVID lockdowns, through the subprime mortgage crisis. 7% is a great number. And as we know where we start in the beginning of the quarter, we don't always end because a majority of companies beat. Because companies issue guidance that is very conservative. We know the game. They issue conservative guidance hoping to under promise and over deliver. That's a way to get the stock to pop. When you say, well we beat, you know, we actually ended up beating on both of our metrics. What I will say is also somewhat worrisome is that more companies are issuing negative guidance for Q1 than we see historically.

[Telis Demos]

And so like dramatically so or just a little bit?

[Christine Short]

Yeah, I think that. So currently we've got 107 companies from the S&P 500 have issued guidance for Q1. 68 of those are negative, 30 something. Whatever. The differences are positive. We're running higher than the both the 5 year and the 10 year average at this point. So that's a little worrisome when you see breaking from some of the averages. But again, this is a little bit of a gain.

[Miriam Gottfried]

Corporations play Telus and I have both covered a lot of earnings reports and we know that sometimes the stock doesn't move in the way you expect it to. So do beats and misses really matter? I mean, what should investors actually be looking for on an earnings report to tell them how the stock's going to move.

[Christine Short]

Yeah. It's funny, I feel like I have been covering earnings for 15 years. I feel like at one point the beat on the top and bottom line really mattered. I feel like it's mattering less because there are different KPIs for each company. Right.

[Telis Demos]

If you're looking, KPIs are like, like numerical targets that people are looking at that might not be earnings, revenues.

[Christine Short]

Right. And it can be company specific or like Netflix, it might be new additional subscribers. Right. For some of the social media companies, it may be monthly active users or and sometimes you don't you have an idea? Okay, for Apple, will it be iPhone sales? But each quarter that target could also move. But yeah, so. And guidance is a huge piece of that. Back to your earlier question, tell us, like the quarter's backwards looking. All of those metrics are backwards looking. It's guidance going forward that you really want to pay attention to. How does it compare to what analysts were expecting and how does it compare to prior guidance that the company issued? Investors really don't want to see, especially this very crucial quarter where there's so much uncertainty, they are not going to react well to guidance that is moving lower. Similarly, last year we saw, you know, price earnings ratios, valuations were so high that you had to be perfect, especially like the mega tech names, the Mag 7. It was like investors really wanted everything to line up. A one penny beat wasn't going to do it. You know, you really had to come and show that the strength was continuing because the price you're paying for these stocks have increased so much.

[Telis Demos]

Yeah. I want to ask you, you talked about this kind of, you know, expectations are changing. I feel like Delta and maybe airlines have been an interesting one. Right after the fourth quarter reports Delta was very optimistic. They came out in January with positive indicators, you know, the stock was doing well. But then, you know, in recent weeks, Delta has lowered its first quarter outlook, citing reduced consumer and corporate confidence and economic uncertainty. So, you know, that seems like a kind of a bellwether that, you know, people aren't, people aren't flying. They're probably tightening their belts in other ways too, right?

[Christine Short]

Yeah. It's interesting you say that because CEO of Delta @ Bastion had said back in January, this is going to be a record year, best year. So. And then two months later, as you said, they issued guidance saying, well, actually they pulled back earnings per share on the year, fell from originally $0.70 to a dollar a share and now they're down $0.30 to $0.50. A share. So that's a meaningful drop. And like you said, certainly a bellwether. They actually report on Wednesday. So before we even hear from the big banks, Delta comes out. And it's not just them. America lowered guidance last month. American Airlines, Airlines lowered guidance last month. Southwest not only lowered guidance, revenue expectations are now 4%. They were seven. But they're also going to charge for checked bags. They've never done that before. United didn't lower guidance. But at the JP Morgan Industrials conference back in March, they echoed the same sentiment. We're seeing travel demand falling for government, so a lot of federal workers losing their jobs. So you're not seeing as much travel on that front, but also leisure travel. And like you said, you know, that was like a hotspot post Covid. Everyone couldn't wait to travel.

[Telis Demos]

Revenge travel.

[Christine Short]

Yeah, yeah, exactly. And even as recently as January, that trend was expected to continue. So to see it drop so precipitously just in two months, to your point, means consumers are really tightening their belts on the things that they were willing to spend on, you know, the travel, the leisure, the experiences. We just saw this in the recent inflation report. That dining expense, you know, going out to eat has fallen. And that was one area that certainly.

[Telis Demos]

Benefited, that had been a stalwart of consumer spending the last few years.

[Miriam Gottfried]

What about another mode of transportation which we can't really live without, which is cars? I think that that's going to be a big focus in this quarter.

[Telis Demos]

Gosh, it seems complicated to figure out with the tariffs. And I know a car made here has imports. A car made over there has, has, you know, it's so complicated.

[Miriam Gottfried]

And can the automakers pass along these price increases?

[Christine Short]

They've been struggling even before tariffs. So the big three here in the US Struggling with competition, obviously the tariffs in a way meant to make that better. But as you point out, the tariffs aren't only on the completed vehicle, which is for gm, Ford, Chrysler is completed here in the US it's those parts that are coming from low cost countries abroad and each of those will have a levy placed on them. The automakers have warned this will be disastrous for the industry. On top of that, as you mentioned, not only will that drive up the cost of cars that they're already having trouble selling, but now we've got a consumer that's really holding back on big ticket purchases like automobiles, like appliances. And so it's like a double whammy for that industry.

[Miriam Gottfried]

And didn't President Trump explicitly warn the auto CEOs do not raise prices as a result of these tariffs. So the spotlight's kind of on them right now.

[Christine Short]

I suspect there's a bit of negotiations going on in the background with regards to these tariffs and getting exemptions on those parts tariffs or certain cost parts. Again, we're kind of in this fog of uncertainty around what the tariffs are, what they're on, what the timing is. But I have to imagine those CEOs are going to the administration and trying to negotiate those right now.

[Telis Demos]

Could there be companies that actually benefit from this dynamic? Right. Like we have say a company like CarMax, right. They report next week. Maybe you're going to rush out and buy a used car right before you think the prices of cars are going to go up. If you think the price of auto parts are going to go up, maybe you rush out and you buy all of the parts you need now. Right. You get a couple of windshield wipers. Well, maybe you should get those winter tires now before the price increases. So could there be companies that actually have great first quarters or have give.

[Miriam Gottfried]

Strong guidance because of the anticipation of tariffs?

[Christine Short]

Yeah, in the short term there could be strength. I mean, anecdotally I will just say my sister in law was saying we need a new car. I checked how much it would be to fix it. It's like almost as much to fix it as it would be to just get a new one. I have to buy this now because I have read that I have six months until car prices. The tariffs as we know, impact every good differently. So when will those prices filter down to consumers? Well, if we're talking about produce, that's an immediate thing you can't keep. There's no shelf life for bananas. So cars, there's obviously an inventory that's already out there on the lot. So yes, I have heard this anecdotally from friends, from family members that are like, I better get my big ticket, I need a new washing machine. So maybe I get that now. So that's just in the short term.

[Telis Demos]

Right.

[Christine Short]

But in the long term, in the guidance we see, obviously these companies will be reflecting what's gonna happen throughout this year and next year and likely will be a negative impact there.

[Telis Demos]

So in general, if tariffs do what I think the president and people around the administration intend, which is to re shore parts of American manufacturing and things like that, are there companies whose shares or earnings might reflect that now or are we just in a long adjustment period and those benefits will be difficult to quantify or things that we might not see for a long time? What should we be thinking about that in earnings now or is it too soon?

[Christine Short]

I think it's probably too soon. I think earnings and guidance are going to be a little murky this quarter. I mean, obviously there are intended beneficiaries. I just saw US Steel got upgraded by a few analysts because they are set to benefit at some point, but we know they don't necessarily have the ability to create the supply needed.

[Telis Demos]

Right.

[Christine Short]

As tariffs are placed on steel imports from other places. So there is going to be an adjustment period even for the beneficiaries. There's going to be a lot of demand and they won't necessarily be able to keep up with that supply from day one. So again, I've already started to see it a couple weeks ago. Dollar Tree, for example, reported they're not one of the intended beneficiaries but they gave guidance that excluded the impact of tariffs. And I think you start to see a couple flavors of guidance this earnings season. Those saying here's our guidance, you know, not including the impact of tariffs, maybe here is another metric that includes it. But I'd say for the most part some of these companies will go the way of Dollar Tree and just say, you know, they will mention, hey, we know this is going to have to filter into our guidance at some point, but we're not ready to say what that impact is because frankly we don't know.

[Miriam Gottfried]

Some of them might be rewriting their guidance up until the minute before their earnings call.

[Christine Short]

I mean we've got some, you know, there's certainly news happening every day and you know, the, like you said, the situation might be changing day to day. It might change the day before their earnings and they might be pulling an all nighter with the IR team to figure out what exactly they're willing to say about it.

[Telis Demos]

Are there any companies that stand to more or less directly benefit from tariffs? Are there people who, because of the impact that tariffs have on the price of imports that they compete with, maybe it's because of something that happens because of currency movements and things like that. Are there any companies that are like tariff winners that you would point out.

[Christine Short]

In the long term? Some of the materials names, certainly moving production back here leaves you with less of a choice.

[Telis Demos]

Materials that's like, well like making basic stuff, right. The raw materials that go into things, mining things. Right, okay.

[Christine Short]

And then you know, even on the consumer front, I think about a Walmart, right? They have a, they've been doing pretty well. A large portion of their business is grocery. We all need groceries, right? That's why they've outpaced Target in the last year. They have more of an ability to negotiate and to stock those shelves before tariffs go into effect versus smaller businesses that don't have the warehouse space. I will say though, even those costs I think kind of get passed down to consumer to some degree because you do have to pay to stock up and stash store things. But those bigger box names, there will be more pricing flexibility. And Walmart has said they are trying to price protect for their consumers. Look, they have benefited from inflation. They not only have their target group, but they have higher income groups moving into Target. It's a one stop shop. You can get your groceries, you can get your discretionary items. As people are trading down and looking for ways to save money. Walmart has been a winner and again, because of their size and their ability to negotiate with suppliers, hold things in warehouses, I think they can price protect a little better than some of the smaller names in retail.

[Telis Demos]

Interesting. Miriam, of course we had an episode a couple of episodes ago. We talked about the difference between small companies and large companies. With large companies having lots of ability to negotiate and other levers that they can pull. It might be the smaller and midsize companies that really feel the heat from tariff and trade policy. All right, Christine, we're going to take a quick break, but when we come back, we've got one more question for you, so stay put.

[Miriam Gottfried]

All right, welcome back, Christine. In 30 seconds or less, is there a sector of the economy that will surprise the market this quarter?

[Christine Short]

Yeah, I think I'm going to go with tech therapy just because it's gotten such a bad rap this quarter. So many of those Mag 7 names have fallen, but the base case remains the same. A lot of these names underlying fundamentals are still quite strong. I still like Nvidia. Their sales for their Blackwell chip have come in about 3.6 million orders.

[Telis Demos]

That's their most advanced chip, their most.

[Christine Short]

Advanced chip that they've recently launched. CEO Jensen Huang said the demand is crazy. I'm going to listen to things like that. When the underlying fundamentals are still strong, they're still expected to post earnings and revenue growth over 60%. So I'd say you still see some winners in the tech space.

[Miriam Gottfried]

AI isn't dead yet. Thanks, Christine.

[Christine Short]

Thank you so much for having me.

[Telis Demos]

Yeah, thanks for being on.

[Christine Short]

It was my pleasure.

[Telis Demos]

And that's everything you need to know to take on your week. The show is produced by Trina Menino, Jessica Fenton and Michael Lavelle with help from Jess Jupiter, Michael Lavelle and Jessica Fenton are our sound designers. Michael also wrote our theme music. Aisha Al Muslim is our development producer. Scott Salloway and Chris Zinsley are the deputy editors. And Philana Patterson is the head of news audio for the Wall Street Journal. For even more, head to WSJ.com I'm Telas Demos.

[Miriam Gottfried]

And I'm Miriam Gottfried. Until next time.

[Telis Demos]

So we're doing a podcast, huh?

[Miriam Gottfried]

Oh, yeah.

[Telis Demos]

It's like we do one every week. God, we do one every week. When you say it like that.