- UBS analysed hundreds of thousands of earnings calls to understand which companies are most impacted by US President Donald Trump's trade war.
- UBS found that words like trade, tariffs, and trade war have been used more often in the last year than at any other point since 2010.
- The automotive sector has discussed the trade war most frequently and has seen the biggest impact in terms of share price drops.
When it comes to macroeconomic risks for businesses, Donald Trump's trade war is pretty much the only game in town right now.
Trump's tariffs on goods flowing into the USA from China, the EU, and Canada — and his threats to increase them — are taking up a lot of thinking time for major corporations at the moment.
UBS set out to find out which industries are worrying about trade wars the most using a technology called "Transcriptlytics." The proprietary technology allowed the bank to analyse hundreds of thousands of earnings calls held by companies around the world over the past few years. In total, the Swiss bank says, it combed over more than 450 million words of text.
UBS found that perhaps unsurprisingly words and phrases like trade, tariffs, and trade war have been used significantly more in the last year that at any other point since 2010. Words from what the bank calls the "trade taxonomy" have made up roughly 8% of recent earnings calls. Previously, they had not been higher than around 2% at any point since 2010.
"Starting at the global level it would be logical that the frequency of usage of "trade war" related language would have picked up in recent reporting periods, compared to the prior 6 years of data (the duration of the data set)," UBS' team of James Arnold, Joao Toniato, Nick Nelson, and Jad Younes said.
UBS Evidence Lab
Certain industries seem more concerned with President Trump's tariffs than others — or at least they are talking about them more.
That does not necessarily correlate, however, with how much they will actually be impacted by the trade war, UBS said.
"There are a number of sectors – e.g. luxury and software where the frequency of 'trade war' language has risen and the sectors have outperformed, i.e. the market appears to be sanguine about the potential risks."
There are of course sectors that are both fearful of tariffs and seeing an impact already. The automotive industry has both the most frequent discussion of the trade war and the biggest negative impact in terms of share price drops in the sector.
Auto companies are particularly worried about the trade war given that Trump has threatened to slap tariffs on the car industries of Japan and the EU. A possible tariff of 25% would mark a major hit to the profitability to automakers. Just this week, Swedish automaker Volvo postponed a $30 billion IPO, citing uncertainty around the trade war.
The chart below, compiled using Evidence Lab data, shows the usage of trade war related words in earnings calls, alongside the sector's performance since the beginning of the trade war:
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