JPMorgan Chase & Co. has cut its 2020 earnings estimates for U.S. stocks based on the projected impact of incoming tariffs and pinpointed companies that could be particularly affected by the levies.

“Tariffs remain the largest source of risk for equities,” strategists led by Dubravko Lakos-Bujas wrote in a note Thursday. The bank is reducing its 2020 earnings estimate for companies in the Standard & Poor’s 500 Index to $177 a share from $178 to account for tariffs that are expected to hit on Sept. 1.

President Donald Trump bowed to pressure this week from U.S. businesses over the economic fallout of his trade war with China, delaying until December new tariffs on a wide variety of consumer products including toys and laptops. Other levies, though, are still set to take effect next month. Some agricultural products, antiques, clothes, kitchenware and footwear remain on the list to be hit Sept. 1 -- with a total value of more than $110 billion, according to a Bloomberg News analysis of last year’s import figures.

JPMorgan warned that small businesses have limited capacity to pass costs along to suppliers and end users. And the strategists see tariffs costing an average of about $1,000 annually per household with the new round of 10% tariffs, up from about $600 from earlier stages of the trade war. That would largely offset the benefits from tax cuts, which averaged out around $1,300 per household, they said.

“The impact from reduced spending could be immediate for discretionary goods and services since tariffs are regressive,” the strategists wrote. “Unlike the agriculture sector which is receiving subsidies/aid to offset the impact of China’s retaliatory actions, there is no simple way to compensate consumers.”

Companies to be affected by the tariffs set to start Sept. 1 are primarily in sectors like textiles, tech hardware and machinery. They include Dow Inc., Caterpillar Inc., Harley-Davidson Inc. and Whirlpool Corp., according to JPMorgan. Those most likely to feel an impact from the levies set to start Dec. 15 -- in sectors like chemicals, machinery and tech hardware -- include Nike Inc., Apple Inc. and Mosaic Co., the firm said.

“Retail companies have lower pricing power and less dedicated supply chains, which should translate into weaker margins as companies absorb some of the incremental tariff costs,” Lakos-Bujas and his colleagues wrote. “On the other hand, tech companies should more easily pass on the incremental input costs to their core suppliers and end users.”

JPMorgan also looked for companies with elevated mentions of trade in the first half of the year, finding names such as Home Depot Inc., Ingersoll-Rand Plc and Honeywell International Inc.

Still, the relatively direct damage to consumers from fresh tariffs ahead of the 2020 election suggests there’s “a good chance” the decision is reversed, the strategists said.

--With assistance from Eddie Spence, Chris Middleton and Dominic Carey.

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