The Trump administration's tariffs are a "clear net negative" for homebuilders and building products amid a weak housing backdrop, RBC Capital Markets said Friday in a report.
Late Wednesday, President Donald Trump announced duties on imports from several countries, including China and Japan. A 10% base tariff rate takes effect for all nations Saturday, though there will be additional duties that vary by country. China responded Friday with its own retaliatory tariffs of 34% on US products.
The tariffs posed a "significant earnings risk" if they hold, given "fragile" affordability and demand in the homebuilding sector, RBC said.
"The breadth of tariffs could unveil surprise exposures while being difficult" for companies to navigate, RBC said.
The companies with the highest China import exposure are Fortune Brands Innovations (FBIN), Masco (MAS), and Whirlpool (WHR), which may face 160 to 370 basis points of "direct margin headwinds" on their imports, RBC said.
The tariffs may generally result in a 15% to 30% incremental impact on fiscal 2025 earnings per share for certain building products companies based on China exposure alone, RBC said.
"Our sense is it will take some time for companies to wrap their arms around all of their different exposures/impacts, so while between growth and tariff headwinds we'd expect potential for sizable downward guidance revisions," RBC said.
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