Some of the world’s biggest producers of food, consumer goods and automobiles reported stronger-than-expected quarterly results on Thursday, easing investor concerns about the impact of US President Donald Trump’s import tariffs.
Ahead of the third-quarter earnings season, global companies had warned of more than $35 billion in tariff-related costs as U.S. taxes hit their highest level since the 1930s. They also face disrupted supply chains, lower consumer confidence and higher input costs.
As Trump continues to use trade policy as a negotiating tool, executives still face regular threats of new tariffs and fears that they will lead to higher inflation and hurt household budgets.
On Thursday, the busiest day of this earnings season so far, some reports suggested that companies are finding ways to pass on higher costs to customers or reduce them, helping fuel rallies in the stock market.
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Faster cost cuts
Take Sweden’s Volvo Cars: The company’s third-quarter earnings far exceeded analysts’ expectations, sending its shares up as much as 40%, as an extensive cost-cutting program launched by CEO Hakan Samuelsson began to bear fruit.
The company is among the European automakers most exposed to Trump’s tariffs, as most of its cars destined for the United States are exported from Europe.
“What we’re seeing now is really, wow, it’s turning out faster than we thought and faster than we planned,” Samuelsson said of the cost reductions.
Gross profit margin increased to 24.4% from 17.7% in the previous quarter. To further counter tariffs, it plans to move production of some hybrid models to the United States in the coming years.
Britain’s Unilever, another multinational with a new CEO at the helm, also reported quarterly sales growth that beat expectations, driven by demand for beauty products across North America despite cautious consumer sentiment.
Like its peers, the maker of Dove soap and Hellmann’s mayonnaise has been streamlining operations to reduce costs, and CEO Fernando Fernandez is focusing on premium products to boost margins.
Earlier this week, German sportswear giant Adidas raised its annual operating profit forecast, saying it had managed to mitigate some additional costs stemming from higher US tariffs.
Hasbro raised its full-year guidance Thursday, betting on holiday sales and demand in its digital gaming segment even as macroeconomic uncertainties cast a shadow on spending by U.S. shoppers.
Ford is scheduled to report its results later on Thursday.
The evidence so far in the United States shows that spending by wealthier consumers is helping to support overall consumption, while low- and middle-income consumers are more cautious due to lingering concerns about inflation.
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More challenging market for some
After a prolonged period of uncertainty and turbulence, the first batch of results offer a glimpse into the industries and regions most affected and the strategies companies have adopted to mitigate costs.
So far, the European Union, Japan and Britain have signed trade deals with the United States to reduce tariffs.
Swedish tissue products maker Essity, like many consumer goods companies, has been raising prices to cover rising costs. It laid out plans to cut jobs and split up its consumer business, which CEO Ulrika Kolsrud hopes will help in a “challenging” market.
Demand for Essity napkins and paper towels from restaurants and hotels has fallen over the past two quarters.
French tire maker Michelin, which also faces challenging markets, lowered its 2025 outlook due to weakness in North America.
CEO Florent Menegaux cited a difficult economic outlook in the United States.
“The real economy, the goods economy, is not working at all,” he said.
“We can see it because the trucks are not running, the level of trust between transport companies is plummeting.”
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News Could Boost Stock Markets Further
Big rallies in some of the market’s worst-hit stocks, such as Volvo Cars, illustrate the relief among investors when things are not as bad as feared.
That’s fueling prolonged rallies in the U.S. and European stock markets, especially when expectations are low.
European companies are expected to report an increase of just 0.2% in third-quarter profits, on average, which would be the worst quarterly performance since the first quarter of 2024.
Of the 78 companies in the US S&P 500 index that have reported earnings so far, 87% have reported earnings above analysts’ expectations.
With information from Reuters.
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