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Industrial firms offset tariffs with cost-cutting, price

hikes

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Consumer-facing firms, European cos struggle with tariff

impacts

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Tariff effects still unfolding, uncertainty remains a

concern

By Utkarsh Shetti

Nov 3 (Reuters) - Industrial companies have been on a

roller-coaster this year as they tried to adjust to the shifting

trade policies of U.S. President Donald Trump, but this quarter,

executives suggested the confusion may be receding as

corporations have had time to adjust to higher levies on U.S.

imports of foreign goods.

Unlike in the first half of the year, some of the U.S.

bellwethers that reflect the "real economy" - heavy machinery,

engine makers and construction firms - have navigated the

environment with strong demand, cost-cutting and price increases

to offset the Trump administration's tariffs. While there are

still plenty of concerns about coming quarters, the

unpredictability factor has faded, executives say.

"Certainly, from a cost standpoint and maybe from a demand

standpoint ... tariffs are no longer the kind of the main event

here," Michael Larsen, chief financial officer at Illinois Tool

Works ( ITW ), said on a post-result analyst call last week.

Companies that have reported results between October 16 and

October 31 put the total estimated hit to global companies'

bottom lines at about $7 billion, according to a Reuters

analysis, though the markets are still only about midway through

the earnings season globally. In the second quarter, that figure

was estimated at a range of $16.2 billion to $17.9 billion.

STRONGER REVENUE GROWTH

U.S. industrial companies at present are reporting their

best year-over-year revenue growth since the first quarter of

2023 at 6.3%, according to data compiled by LSEG.

Over the summer, equipment maker Caterpillar ( CAT )

estimated tariffs would cost the firm between $1.5 billion and

$1.8 billion in 2025. In results released on October 29, it

narrowed that range to $1.6 billion to $1.75 billion after

reporting a strong quarter, and its shares rose 12%.

"Generally speaking, industrial companies are doing a pretty

good job managing through the uncertainty and the changes in the

tariff landscape," said Joshua Schachter, chief investment

officer at Easterly Asset Management.

Logistics giants UPS and FedEx ( FDX ) cut costs to

offset the scrapping of duty-free status for low-value

e-commerce shipments. However, UPS has also sharply cut its

payrolls, jettisoning 48,000 jobs in the face of continued

pressure on its business this year.

Analysts fear the bleak outlook among lower- and

middle-income earners that has hit consumer companies like

Newell will reach other parts of the economy. In

addition, the Trump administration reached agreements with

numerous nations that set levies on foreign imports for many

between 15% and 20% - after a previous pause left them at 10%.

That effect has not yet been fully felt.

"This is the real beginning of when the effects of tariffs

would have hit," said Angela Santos, partner and customs

practice group leader at ArentFox Schiff. "We're only in October

and the increases for reciprocal tariffs started in August, so

it hasn't been that long."

EUROPEAN COMPANIES STILL FACING THE HEAT

Some European companies that rely on U.S. sales have had it

worse, as U.S. importers are less likely to buy their products

due to the high levies.

SKF, a Swedish bearings maker considered a global

manufacturing barometer, expects weak short-term demand as

customers remain hesitant due to tariffs and uncertainty. "If we

can get a bit more calm and stability, then I think we will see

demand return," SKF CEO Rickard Gustafson told Reuters on

Wednesday.

Swedish construction equipment maker HIAB told

Reuters that orders have been slowing since mid-February due to

trade tensions.

The German Engineering Federation VDMA, which represents

3,600 machinery and plant engineering companies, has warned that

more than half of German and European machinery exports could be

hit with new tariffs if Washington includes more products on its

list of aluminum and steel levies. European car makers like

Volkswagen have been hit particularly hard, with the

latter flagging a $5.8 billion tariff hit in its most recent

results.

Yale's Budget Lab, which has been tracking trade policies,

says the effective U.S. tariff rate stood at 18% as of

mid-October, highest in more than 90 years.

The Trump Administration's new 25% tariffs on imported

medium- and heavy-duty trucks and parts are scheduled to start

on November 1, including dump trucks and tractors for

18-wheelers, alongside a 10% tariff on imported buses.

The full effects are still to be felt as industrial

companies are going through inventory that hasn't been hit with

tariffs yet, said Don Marleau, managing director for metals and

capital goods at S&P Global.

"In a lot of cases, we don't have higher tariff costs yet.

We have higher estimates for tariff costs."