Earnings season is approaching, and the US stock market is bracing for the next storm after the impact of tariffs.

Note that, following the impact of Trump's tariffs, the US stocks are about to face a new major test: the corporate earnings season. Currently, market expectations are not optimistic. As investors' concerns about the impact of the trade war on corporate profits intensify, the total market value of S&P 500 index components has evaporated by over $5 trillion in the past three trading days. Wall Street analysts' fears of an economic recession are escalating, and there is a general pessimistic outlook on the prospects of companies. Data shows that the current market expects a year-on-year earnings growth rate of 6.7% for the first quarter of S&P 500 index components, significantly lower than the forecast of 11.1% when Trump was elected president in November last year. For the full-year earnings growth rate in 2025, analysts' expectations have dropped from 12.5% at the beginning of the year to 9.4%. "In the face of uncertain tariff policies, the profit expectations for the corporate earnings season are likely to significantly skew downward." Sarah Hunt, Chief Market Strategist and Partner at Alpine Saxon Woods, stated. The earnings season will kick off this Friday, with major US banks such as JPMorgan Chase (JPM.US) and Wells Fargo & Company (WFC.US) leading the way in announcing their performance. Trump's tariff policies are threatening the stability of multinational companies' supply chains and dampening export demand. At the same time, concerns about an economic recession are eroding consumer confidence. Bhanu Baweja, Chief Strategist at UBS Group AG Investment Bank, warned that tariffs could inflict heavy damage on consumers, intensifying the risk of zero profit growth for S&P 500 index components this year. Thick fog Even before Trump imposed tariffs on multiple trading partners, the profit outlook for American companies was already showing signs of weakness. Bloomberg industry research data shows that in the fourth quarter of 2023, the percentage of companies releasing earnings guidance for 2025 that exceeded expectations hit a new low since 2010. "Besides emphasizing the increased uncertainty, companies may find it difficult to provide more substantive information." Joe Gilbert, Portfolio Manager at Integrity Asset Management, pointed out. "We are moving from the fog of the trade war to the fog of profit prospects." Operating profit margins will become a focus for investors, as they reflect whether a company can successfully pass on cost pressures. Data shows that the expected operating profit margin for the first quarter has dropped from 16% in January to 15.6%. However, Dave Mazza, CEO of Roundhill Financial, believes that this expectation may be too optimistic. "The main risk of further downside in US stocks lies in the shrinking of operating profit margins caused by tariffs." Mazza warned. At the same time, the "Big Seven" stocks that have led the rise in US stocks over the past two years are also facing wavering investor confidence. According to Bloomberg industry research forecasts, the net profit of this group may reach the lowest level since the first quarter of 2023. "If these tech giants send negative signals in terms of data centers or AI capital expenditure, it may trigger further stock price declines." Mazza added.