The impact of U.S. President Donald Trump's sweeping tariff agenda is likely to be seen in the upcoming second-quarter corporate earnings season, according to analysts at Capital Economics.

Despite having largely delayed the implementation of his punishing "reciprocal" levies first unveiled in April, Trump has left a baseline 10% tariff in place, as well as heightened duties on items like steel, aluminum and autos. The effective U.S. tariff has in turn increased compared to its level at the beginning of Trump's second term earlier this year, analysts have suggested.

This week, Trump has embarked on a new chapter of his tariff drive, issuing letters to more than a dozen nations threatening them with elevated duties if they are unable to reach a trade deal with Washington.

However, Trump has paused the date for his reciprocal tariffs to take effect to August 1. They were previously slated to kick in on Wednesday, after having initially been postponed in April.

Trump has also said he will slap 50% duties on U.S. copper imports and hinted that other sector-specific tariffs could be coming on semiconductors and pharmaceuticals.

Economists have predicted that the tariffs could drive up consumer prices and, eventually, weigh on activity.

In a note to clients, the Capital Economics analysts said "there has not been big effect" on prices so far, although they flagged that they anticipate the uptick in inflation will be reflected in the upcoming consumer price index report for June.

"While that could partly be the result of a winding down of stockpiles accumulated before higher tariffs came into effect, we now suspect U.S. firms will eat more of their cost, if only in the short run for political reasons," the analysts wrote.

Notably, Trump previously took aim at Amazon (NASDAQ:AMZN), after reports said the e-commerce giant was planning to outline the cost of trade tariffs to its customers.

The higher tariffs could become more apparent in companies' next quarterly results, with the levies particularly threatening to dent gross profit margins, the Capital Economics analysts said. They noted that Wall Street estimates for forward twelve-month gross margin expectations were already pared back following Trump's "Liberation Day" tariff event on April 2.

The analysts added there has also not been "big downgrading" to margin predictions across the U.S. stock market.

"A glass-half-empty view would that there is plenty of margin for error," they said.

Source: Investing.com