U.S. trade policy has reemerged as the top concern from chief financial officers at some of the world's largest companies.
More than 35 percent of CFOs taking the fourth-quarter CNBC Global CFO Council survey say U.S. trade policy is the biggest external risk factor facing their business, and nearly 75 percent of respondents expect U.S. trade policy to have a negative impact on their business over the next six months. Not a single CFO surveyed expects a positive impact as a result of U.S. trade policy.
The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing nearly $5 trillion in market value across a wide variety of sectors. The survey was conducted from Nov. 13–19, 2018.
Throughout the survey, trade shows up as a nagging concern for CFOs, especially for members in Europe and Asia. More than 46 percent of European CFOs and over 44 percent of Asia CFOs say U.S. trade policy is the biggest external risk factor facing their business. Also in Europe, nearly two-thirds of CFOs there say the cost of raw materials will outpace rising costs of labor and capital over the next six months, likely a result of higher tariffs.
More than half of the EMEA and APAC CFOs surveyed named trade, trade war with China, tariffs, or "uncertainty created by U.S. administration" as the most important business or economic story of 2018. Most North America-based CFOs feel the same way.
The concerns about trade come amid increasing stock market pessimism from CFOs. A majority taking the survey now think that the Dow Jones Industrial Average will fall below 23,000 — another 2,000 points down — before ever reaching a new record above 27,000.
In North America, trade worries also show up in the way CFOs feel about Trump administration officials and the president himself. There appears to be a strong correlation between these officials' views on trade and whether CFOs approve of their stewardship of the U.S. economy.
White House Trade Advisor Peter Navarro is at the bottom of the list, with 60 percent of North American CFOs disapproving of his handling of the economy, followed by U.S. Trade Representative Robert Lighthizer and President Donald Trump (53.3 percent).
Navarro has been an aggressive proponent of continued punitive tariffs for China and has been seen as the person fuelling Trump's personal obsession with reducing trade deficits. Last week the White House curtailed Navarro's role in shaping U.S. trade policy after Navarro engaged in a public clash with top economic advisor Larry Kudlow, who favors deescalating tensions with China. However, the White House also said it is making no changes to its current tariffs on Chinese goods and still may go ahead with steeper duties on the largest portion ($200 billion) of the affected goods in January. Forty percent of North American CFOs say they approve of how Kudlow is handling the economy, and just under 27 percent disapprove.
About a quarter of North America CFOs seem to think Congress should serve as a check on the Trump administration's worrisome trade policy, but they do not think trade should be the No. 1 priority for Congress in 2019, with just under 27 percent citing it as the top congressional issue. "Infrastructure" legislation has more support among CFOs.
(Note: The CNBC Global CFO Council Survey for the fourth quarter was conducted from Nov. 13–19, 2018. Thirty-seven of the 121 global members responded to the survey , including 15 North America members, 13 EMEA members and 9 APAC members.)
Complete survey results are below.