General Electric Co., which garners about $7 billion a year in revenue from China, hasn’t suffered major harm yet from President Trump’s escalating trade war with the world’s second-largest economy, but executives are watching developments closely.
The tariffs on $250 billion of Chinese imports that have been announced by the White House so far might cost the Boston, Mass.-based company as much as $400 million, based on the $2.9 billion in products it brings to the U.S. from China annually, CEO John Flannery told investors on an earnings call Friday.
The figures illustrate the potential costs of the White House’s widening trade disputes, which economists say risk undermining the benefits of last year’s tax increases and, ultimately, pushing the world into a recession. Trump has shrugged off the concerns, doubling down on his protectionist policies Friday by repeating that he’s ready to place tariffs on as much as $500 billion of Chinese goods to halt Beijing’s unfair trade practices.
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At the same time, Washington has imposed double-digit duties on steel and aluminum imports, angering allies from Canada to Europe to Mexico, and threatened levies on automotive imports that the industry warns will cost jobs and crimp U.S. production.
At GE, credits for Chinese parts that are built into the company’s products and exported might reduce the cost of tariffs by as much as half, Flannery said, and the manufacturer could adjust its supply chain over the long term, if necessary, to reduce expenses further.
“We don’t see a major impact yet financially, certainly not on our 2018 guidance,” Flannery explained. He still expects profit of as much as $1.07 a share this year and free cash flow of about $6 billion.
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Still, GE has “a massively global business in every sense, both the customers, supply chains, everything,” he said. “And our view right now is we hope and we expect that ultimately these matters reach a sensible negotiated conclusion, and we think that’s really in the best interest of all parties involved.”
Companywide, profit of 19 cents a share in the three months through June compared with the 18 cent average estimate from analysts surveyed by FactSet. Net income tumbled 30 percent to $615 million, the company said in a statement.
GE fell 3.6 percent to $13.23 in New York trading on Friday morning, widening the stock’s decline this year to 24 percent.
