Corporate America’s real worries about Trump are buried in annual reports

Companies are telling their investors how President Donald Trump’s plan to radically remake the US government poses new risks to their businesses.

In recent weeks, Chipotle Mexican Grill warned about potential tariffs on avocados and limes. Johnson & Johnson sees a risk that Food and Drug Administration (FDA) cuts will slow down medicine approvals. And American Airlines Group alerted shareholders to possible additional charges for aircraft and parts from outside the US.

Many of these disclosures are being tucked quietly into already lengthy “risk factor” language in annual regulatory filings, at odds with the upbeat tone some executives take publicly when describing their work with the White House.

CVS Health CEO David Joyner told analysts on a February 12 conference call that he was “encouraged by the constructive dialogue with the new administration” about payment rates in private Medicare health plans, a crucial issue for the company.

Yet the same day, CVS filed its annual report to shareholders with a new paragraph about “uncertainty” around changing health-care rules. The company warned that “efforts to reform federal government processes and reduce expenditures” could limit funding for government programs “upon which our business depends.”

Uncertainty is climbing

Confidence among businesses and consumers rose after Trump’s election win on optimism around deregulation, tax cuts and the broader economic outlook. But sentiment is now souring - and uncertainty is climbing - as the administration prioritises enacting tariffs instead. That’s set to raise costs for homebuilders, manufacturers, households and more at a time when inflation is barely cooling.

Trump, along with billionaire Elon Musk, is moving rapidly to shrink the federal workforce, raise barriers to trade and immigration, and expand the White House’s control of government agencies. Those moves have left companies racing to figure out where they might be exposed to policy changes or potential tariff hikes, and how they should communicate that to investors.

“As far as what’s material and what’s not, it’s a gray zone,” said Yaron Nili, a corporate law professor at Duke University School of Law. “Especially this early in the administration, it’s not clear that companies have formed a full understanding of how things are going to impact them.”

The annual reports that companies are required to file with the Securities and Exchange Commission routinely include a host of bad things that could happen such as cyberattacks, natural disasters or regulatory shifts. Changes in what companies choose to disclose reveal how they’re strategising for political and global risks.

The disclosures add to confusion for investors trying to gauge the impact of Trump’s policies. Companies including General Motors and Walmart have issued earnings guidance that doesn’t account for the impact of looming tariffs.

Every US president brings an agenda that influences the business environment. During the Biden administration, companies faced heightened regulatory scrutiny and antitrust enforcement.

The scope and speed of Trump’s policy changes is what’s especially challenging for companies right now, according to Jill Fisch, a business law professor at University of Pennsylvania Carey Law School. “A lot of the proposed or discussed regulatory changes are quite broad, and they’re often happening quite rapidly,” she said.

Earlier this month, PepsiCo flagged a risk of reputational damage if its products are considered “ultra-processed,” a term invoked by Health Secretary Robert F. Kennedy Jr. as part of his claims that food companies “mass poison American children”.

There’s such a range of potential risks that some companies are taking a broad brush approach to flagging them.

Centene a health insurer that gets most of its revenue from government programs, said policy changes “due to executive orders or other regulatory actions from the current political administration” have the potential to cut enrollment and reduce or delay payments. Drugmaker Eli Lilly & Co. warned generally about risks tied to “insufficient staffing levels, expertise, or resources” at the FDA.

Brokerage firm Marsh & McLennan went even broader in forewarning investors: “Shifts in regulatory priorities, policy approaches or interpretations of existing laws by federal, state or local governments occur following changes in US presidential administrations.”

BLOOMBERG