Since 2025, a new wave of US tariffs (on China and selected partners and sectors) has increased average effective tariff rates and generated roughly $49.7B in additional annualized customs revenue by early 2026 [61][62]. Surveys and macro studies find that tariffs raise input costs, spur retaliatory measures, and are feeding through to higher consumer prices (e.g., core PCE goods up ~1.9% YoY as of Jan 2026 attributable partly to tariffs) [61]. Sector‑level analyses and firm surveys show margin compression and revised earnings guidance in tariff‑exposed industries [63][64][65].

Transmission Channels to Earnings

1. Direct Cost Increases on Imported Inputs

• Tariffs on intermediate goods (e.g., steel, electronics components, chemicals) raise cost of goods sold (COGS) for manufacturers, construction firms, autos, machinery and consumer‑goods companies [61][62][64][65].

• Firms either:

  • Pass costs through to customers (raising prices, risking volume declines).

  • Absorb them, compressing gross and operating margins.

1. Retaliation and Export Barriers

• Trading partners often respond with tariffs on US exports, affecting:

  • Agricultural producers.

  • Industrial goods and capital equipment.

  • Autos and consumer brands.

• This can reduce export volumes and pricing power, impacting revenue forecasts.

1. Supply Chain Reconfiguration Costs

• Tariffs accelerate reshoring, nearshoring, or supplier diversification:

  • Upfront capex, relocation costs, and inefficiencies depress margins in the transition phase.

  • Longer term, some firms may regain competitiveness and margin as new supply chains stabilize.

1. Demand and Macro Effects

• Tariff‑induced inflation and uncertainty can:

  • Reduce discretionary spending (hurting retail, leisure, consumer durables).

  • Delay investment decisions (impacting industrials and capex‑driven sectors).

Sector-by-Sector Earnings Impact

1. Manufacturing and Industrials

Impact

• KPMG’s 2026 tariff survey and manufacturing advisors report:

• Manufacturers face declining margins, with 55% of surveyed businesses planning further price increases over the next 6 months to cope with tariffs and higher costs [63][64].

• Growth expectations are “essentially flat” into 2026, weighed down by tariffs and trade challenges [64].

• Small manufacturers, especially in construction‑related segments, report revenue declines in the mid‑teens % range since tariff introduction [65].

Earnings forecasts

• Analysts generally:

• Cut operating margin assumptions due to higher COGS and limited pricing power.

• Lower revenue projections in tariff‑sensitive subsectors (e.g., machinery with high China content).

2. Consumer Goods and Retail

Impact

• Consumer‑facing sectors experience:

• Higher landed costs for imported products (apparel, electronics, household goods).

• Need to raise retail prices or shrink margins.

• Surveys of US businesses indicate expectations of:

• “Substantial price increases and labor market impacts” if tariff policy continues, signaling pressure on consumer demand and corporate margins [63].

Earnings forecasts

• Typically revised down via:

• Lower volume growth assumptions as higher prices dampen demand.

• Modestly lower margin assumptions for import‑heavy categories.

3. Autos and Transportation Equipment

Impact

• Heavily reliant on global supply chains with significant imported content.

• Tariffs on parts and assembled vehicles:

• Raise production costs.

• Risk retaliatory tariffs on US exports to key markets.

• Likely outcomes:

• Lower forecast margins.

• Conservative unit sales projections in tariffed regions.

4. Construction and Small Business

Impact

• New data from the Joint Economic Committee indicates:

• Revenue at construction businesses with <10 employees has declined by ~18% since tariffs were introduced in 2025 [65].

• Higher costs for steel, lumber, fixtures and imported components directly impact small contractors with limited ability to hedge or stockpile.

Earnings forecasts

• For public companies in construction‑related supply chains and building materials:

• Analysts model weaker demand and margin pressure, especially in smaller‑ticket, price‑sensitive segments.

5. Agriculture and Food

Impact

• Tariff regimes often include:

• Retaliatory tariffs on US agricultural exports.

• Higher costs for imported fertilizers, machinery, and inputs.

• Net effect:

• Margin pressure and earnings volatility for agribusiness and farm‑equipment makers, depending on export exposure and subsidy offsets.

6. Technology and Electronics

Impact

• Tariffs on semiconductors, components, and finished electronics increase COGS.

• Larger tech firms often have:

• Greater pricing power, allowing partial pass‑through.

• More capacity to reconfigure supply chains, albeit at a cost.

Earnings forecasts

• Near‑term:

• Margins trimmed modestly.

• Higher R&D and capex associated with reshoring/“friend‑shoring” factored into models.

• Long‑term:

• Some benefit from domestic industrial policy that pairs tariffs with subsidies, but the near‑term impact is usually negative for earnings.

7. Beneficiary Sectors

• Domestic‑oriented industries competing with imports (some steel, certain chemicals, selected consumer goods):

• May actually see higher earnings as tariffs raise competitors’ prices and protect domestic market share [61][62].

• Defense and critical‑minerals producers:

• Could benefit from tariffs that penalize foreign supply and from linked industrial policies, leading to increased domestic orders and supportive pricing [62][66].

Cross-Sector Patterns

• Margins:

• Tariffs generally compress margins in trade‑exposed sectors unless offset by strong pricing power or subsidies.

• Revenue:

• Revenue can be hurt by both lower volumes (from higher prices) and reduced export access, particularly where retaliation occurs.

• Valuation:

• Higher uncertainty and lower expected growth/margins often justify lower multiples for the most exposed sectors.

Counterarguments

• Proponents argue that tariffs:

• Protect domestic jobs.

• Spur domestic investment and long‑term earnings growth in reshored industries.

• There is some evidence that:

• US manufacturing output expands modestly in certain segments, but at the cost of higher consumer prices and lower output elsewhere [62].

• For earnings forecasts, the near‑ to medium‑term picture is still largely negative for globally integrated manufacturers and trade‑sensitive sectors, with benefits concentrated in specific import‑competing segments.

Implications for Forecasting

• Forecasting models should:

• Include scenario analysis for tariff rates, retaliation, and pass‑through.

• Segment revenue and COGS by geography and supply‑chain origin.

• Explicitly model:

  • Price elasticity of demand.

  • Ability to substitute domestic inputs.

  • Time and cost of supply‑chain reconfiguration.