The effects of Donald Trump’s trade policy are beginning to show in the real economy, with Gap Inc (NYSE:GPS) warning that new tariffs will dent its full-year operating income by $250 million to $300 million, sending its shares down 15% in after-hours trading.
The clothing group said it expects to offset more than half of the tariff-related costs but chose to exclude the impact from its earnings outlook.
Analysts said that decision may have shaken investor confidence. China now accounts for less than 10% of Gap’s sourcing, and the company aims to reduce reliance on any single country to under 25% by the end of 2026.
Gap maintained its full-year sales and profit guidance and reported better-than-expected first-quarter results, with revenue at $3.46 billion and earnings of 51 cents a share. However, the tariff burden, expected to fall mainly in the second half, overshadowed those gains.
The clothing retailer has joined a list of major US names warning of the impact of the Trump administration's trade policies and their negative trickle through to businesses.
Ford and GM recently suspended forward guidance, citing the lack of clarity of costs and component sourcing for their vehicles, while chipmakers are mired by uncertainty.