The US economy’s divide is widening as top tech groups and banks post record earnings gains despite Donald Trump’s tariffs, while consumer-facing companies struggle with rising costs. The biggest banks and tech firms have shrugged off the impact of the president’s trade war to deliver huge profits.
In contrast, almost two-thirds of S&P 500 companies have reported declining profit margins, with consumer staples and materials companies experiencing a 0.1% year-on-year decrease in earnings and a 5% drop for materials companies. The 10 biggest stocks on the index account for one-third of overall profits, with tech and financials reporting year-on-year quarterly earnings growth of 41% and 12.8%, respectively.
However, data released this week suggests slowing US economic growth beyond Wall Street and Silicon Valley. The Bureau of Labor Statistics reported a slowdown in job growth, with just 106,000 jobs added from May to July, down sharply from the previous three months. A GDP report also showed the economy grew at a 1.1% annualised rate in the first half of 2025, compared with 2.9% in the second half of the previous year.
Companies that are directly affected by tariffs, such as carmakers and airlines, have reported negative earnings surprises and downward revisions to net income. Investors are punishing these companies, with stocks falling on average by 5.6% around earnings announcements. Big Tech stocks, however, have defied analysts’ expectations, with Microsoft announcing a 25% jump in quarterly profits and Meta reporting a 36% increase in net income.
Despite this, experts warn that the impact of tariffs is starting to be felt, with Ford’s surprise quarterly loss due in part to an $800mn hit from Trump’s levies. The hope is that AI investment will continue to drive growth, but some analysts acknowledge that the tailwinds from greater migration and fiscal spending have run their course.
Source: https://www.ft.com/content/aefad7d1-e809-4a16-8acd-6e2ef9f28ebe