Like many global companies, FedEx has been scrambling to adapt to the Trump administration’s ever-changing trade policies. Cross-border transportation volumes fell after some tariffs on Trump’s “Liberation Day” came into effect in April. The situation worsened in May. Now, the company estimates that tariffs could cost $170 million between June and August. As CEO Raj Subramaniam said yesterday on the company’s quarterly earnings call: “A lot of things happen outside of FedEx.”
FedEx actually beat analysts’ expectations for revenue and profits for the March-May quarter, reporting revenue of $22.1 billion and $1.65 billion in net income. Still, stocks fell more than 3% today as investors responded to ongoing trade tensions affecting FedEx’s international business (June 25).
The company’s most profitable shipping routes (between China and the United States) have revenues of about 2.5%. But, as trade frictions continue to escalate, the transPacific lane is under pressure, which includes U.S. tariffs on Chinese goods, which peak at 145% (and China’s retaliation against U.S. goods at 125%), and then partially retreated.
FedEx expects the impact of trade policy to reduce its adjusted operating income by $170 million this quarter. Much of the impact stems from the disruption of China-US trade and the end of the “de Minimis” rule, a tax exemption that had previously allowed goods to be taxed before $800, entering the United States. Brie Carere, FedEx’s chief customer officer, said the pressure on the rule being eliminated by the Trump administration has exacerbated. Carrere noted that the company now expects revenue to remain flat or rise 2% year-on-year in the June-August quarter.
In a different way from previous quarters, FedEx has also decided to cut its annual financial forecast. “Obviously, the trade environment is what we focus on [the first quarter] “We simply can’t predict how this will work,” Carrell told analysts compared to the full-year range.
Still, FedEx’s global footprint provides some insulation for trade-related volatility. With operations in more than 220 countries and territories and 99% of global commerce, the company still has a good location to support customers navigating demand shifts, tariff impacts and supply chain readjustment, said Ramaniam, CEO of Subramaniam. He added that FedEx is ready to adjust its route if trade negotiations require it.
However, predicting the trajectory of these rapidly changing trade dynamics remains a major challenge. “It’s very difficult to predict the next 30 to 60 days or even further,” Subramaniam said. “So we just need to live with it.”
