Trump Tariffs Make Morgan Stanley, Citi Go Slightly Cold On US Stocks: S&P 500 Earnings Estimated To Take A Hit

President Donald Trump’s tariffs are now seen as hurting the profit growth of America Inc. as analysts at Morgan Stanley and Citi joined a growing list of experts warning about the negative impact of the levies.

This comes after JPMorgan Chase & Co. CEO Jamie Dimon said last week that more analysts would trim their S&P 500 earnings estimates as the Trump tariff impact sinks in.

Analysts at Citi downgraded U.S. stocks to ‘Neutral’ from ‘Overweight,’ citing mounting pressures induced by Trump’s tariff shock, according to a report by Bloomberg.

The brokerage cut the S&P 500’s earnings per share (EPS) estimate for 2025 to $255 from $270.

On the other hand, analysts at Morgan Stanley cut their S&P 500 EPS estimates to $257 from $271.

“The 90-day pause on reciprocal tariffs and further concessions over the weekend lessen the near-term probability of a recession, but uncertainty remains high,” the brokerage said.

Morgan Stanley analyst Mike Wilson believes that a trade deal with China that brings notable tariff cuts would offer a significant upside to U.S. stocks. However, until that happens, the S&P 500 could fall below the 5,000 level. This implies a potential downside of 8% to 10%.

Although President Trump paused his ‘Liberation Day’ reciprocal tariffs for 90 days, the adverse impact of this policy continues to remain a concern.

Besides, the Trump administration has continued with its 145% tariffs on goods imported into the U.S. from China, citing retaliation from the Xi Jinping administration as the reason for not granting relief on Chinese imports.

For now, President Trump is considering an exemption for auto parts and foreign car imports into the U.S., saying domestic car makers “need a little bit of time” to make cars in the country.

Amid these developments, the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index, gained 1% on Monday at the time of writing.

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