Dozens of companies that expected rising profits from President Trump are (instead) warning investors in quarterly reports and calls that change in Washington could hurt their bottom lines. Businesses stayed quiet about DOGE until recently, when warnings started appearing under legally mandated quarterly investor reports. The S&P 500 index is down 6%. Consumer sentiment is at a 15-month low on worries about layoffs and rising prices. Rebuilding a U.S. manufacturing sector will be far more complex than reimposing trade barriers. U.S. manufacturing jobs have been declining for generations because of automation, trade policies, China and offshoring jobs. (On Sunday) Trump declined to rule out a recession as the economy stutters from efforts to impose tariffs.
“I hope over time that DOGE can potentially become a tailwind for companies like us who are focusing on the federal government,” Carl Eschenbach, CEO of human-resources software maker Workday, said at an investor conference Tuesday. “But right now, there is a lot of uncertainty, and I don’t know when that’s going to tip.”
The concerns come as Musk’s U.S. DOGE Service, which stands for the Department of Government Efficiency, cuts a chaotic path through the government to reduce spending. Large numbers of federal workers have been fired and reinstated, contracts have been canceled then restored and lawsuits challenging DOGE’s actions have put some initiatives on hold and allowed others to go through.
Federal government contractors say they are still unclear which parts of their businesses may be on the chopping block. The administration is seeking to cut nonessential contracts from every department, according to an email the acting GSA administrator sent to all agency heads last month, a copy of which was obtained by The Washington Post.
The uncertainty has spread even to some companies that don’t directly rely on government contracts. For example, some drugmakers warned that cuts to the Food and Drug Administration could slow drug approvals. And two real estate businesses with large footprints in Washington, D.C., said that mass firings of federal workers could decrease demand for their properties.
Investors are paying attention. Since November, the stock prices of a group of companies with the most potential exposure to DOGE underperformed the S&P 500 index by 20 percent, according to an analysis last month by the investment bank Barclays.
“What do you do right now? Do you invest? Probably you want to wait a little bit to see exactly what happens at the end of the day,” Dominique Toublan, head of U.S. credit strategy at Barclays, said in an interview. “Even on its own, we know uncertainty, risk, ambiguity, can feed on itself and create a slowdown in the economy because people have a hard time deciding how they want to spend, how they want to invest.”
Businesses have mostly stayed quiet about DOGE until recently, when warnings started appearing under legally mandated sections of their quarterly investor reports. The Securities and Exchange Commission requires all publicly traded companies to list significant risks to their businesses. These so-called “risk factors” include shifts in competition, regulation and consumer tastes.
Trump campaigned on a business-friendly agenda, including plans to pare environmental regulations and further slash the corporate tax rate, which he cut during his first term from 35 percent to 21 percent. Weeks into his second term, business groups have applauded his steps toward expanding oil and gas production and lifting SEC rules they saw as onerous.
But a review of SEC filings and earnings transcripts shows the corporate view of the administration is mixed. In addition to the warnings about DOGE, business groups including the U.S. Chamber of Commerce have urged Trump to back off his plan for tariffs, saying they raise the costs of doing business.
Harrison Fields, a White House spokesman, said in a statement that Trump has worked to help businesses by lowering taxes, rolling back regulations and driving “historic investments” in the country.
A spokesman for DOGE did not respond to requests for comment.
Some executives have struck an optimistic tone in public remarks, emphasizing that the products and services they provide government agencies are essential and likely to be spared from cuts. In SEC filings, though, a number expressed worries.
“DOGE is a huge win for us,” Eric DeMarco, CEO of military drone-maker Kratos, said during a call with analysts Feb. 26. But in a Feb. 5 filing with the SEC, the company said: “The potential impact of DOGE and the President’s potential intentions on the Defense and National Security industry, and the Company, if any, is unknown at this time.” Kratos, which reported $762 million in sales from U.S. government customers last year, did not respond to a request for comment.
Defense Secretary Pete Hegseth has ordered subordinates to submit plans for a potential 8 percent budget cut in each of the next five years, with limited exemptions.
John Heller, CEO of technology and engineering firm Amentum, told analysts on Feb. 5, “We still have to deliver services to 330 million citizens, and doing that in a more efficient way should create opportunities for companies that have the ability to deliver more efficient methods and processes and technology.” But in a filing the same day the Chantilly, Virginia-based company warned that a decline in defense spending “could have an adverse impact on our business.”
Amentum derived more than $5 billion in revenue from U.S. defense and intelligence contracts last fiscal year, according to company filings, but DOGE said it canceled contracts for Amentum and its subsidiaries worth $35.3 million in recent weeks.
Chanel Mann, a spokeswoman for Amentum, acknowledged losing almost 1 percent of the company’s revenue “as a result of the new administration initiatives,” but declined to discuss other specifics around DOGE.
Marc Steinberg, a law professor at Southern Methodist University and former enforcement attorney at the SEC, said in an interview that it’s not uncommon for executives to present a more rosy picture in earnings calls, where they are more free to use “puffery” than in required SEC disclosures, which protect companies from investor lawsuits.
“What happens with some frequency is in these earnings calls, there is an upbeat tone of optimism, irrespective of some of the surrounding circumstances,” Steinberg said. “In the SEC filings, more precise disclosure is called for.”
Still, not all companies are reporting risks from the new administration, even within the same industry.
Drugmakers ImmunityBio, PMV Pharmaceuticals, Rezolute and Ventyx Biosciences said in filings that cuts in federal staffing could hurt their business plans, which hinge on getting the FDA to approve their new products within a predictable time frame. The Trump administration fired hundreds of FDA probationary employees — though some were rehired — and the agency faces the prospect of further cuts.
“Disruptions in how the FDA operates due to these policies may materially adversely affect our business,” read a public filing last month by Rezolute, which makes drugs for people with hypoglycemia.
But Eli Lilly, the most valuable U.S. health-care firm, and some other larger pharmaceutical companies have said they are not overly worried. In an interview with The Post on Feb. 26, Dave Ricks, Eli Lilly’s CEO, said the FDA is insulated from deep staffing cuts because half of its $7.2 billion budget comes from “user fees” from companies seeking approval for their prescription drugs and medical devices.
“Almost all of the innovative drug personnel are funded through user fees, not taxpayer dollars,” Ricks said. “So it’s not like the government saves money if they eliminate the people.”
Marty Makary, Trump’s nominee to lead the FDA, said during his confirmation hearing Thursday that he would conduct his “own independent assessment of personnel.”
Encompass Health, one of the nation’s largest operators of rehabilitation hospitals, disclosed in its annual securities filing Feb. 28 that it “cannot predict” whether DOGE and other regulatory changes could result in cuts to Medicare spending, which makes up a large portion of the company’s revenue.
Trump has insisted he won’t cut benefits to Medicare, the federal program providing health insurance to seniors, and Medicaid, which provides health coverage to Americans with low incomes and disabilities. But the nonpartisan Congressional Budget Office said Wednesday that the only way to meet a directive in the proposed House GOP budget, passed Feb. 25, to cut at least $880 billion from health care spending over 10 years would be to cut Medicare, Medicaid or the Children’s Health Insurance Program.
“We are in a period of great uncertainty with headwinds in the health care provider space,” Mark Ordan, CEO of Pediatrix Medical Group, a national physician network, told financial analysts Feb. 20.
An analyst on the call responded with a quip: “All of us are checking Twitter on a daily basis for sort of nebulous headwinds.”
The technology industry, with close ties to Musk, is one of the few sectors sounding widely upbeat about DOGE. Tech executives have effused that the efficiencies Musk says he hopes to achieve at federal agencies will only be possible with their products.
At a Morgan Stanley conference this month, Brian Robins, finance chief for San Francisco-based software maker GitLab, said GitLab is aligned with the goals of DOGE, because the company’s software tools aim to help people do more with less.
“What the Department of Government Efficiency is trying to do is what GitLab does,” Robins said.
At the same conference, Mark Lynch, the chief financial officer at Appian, a McLean, Virginia, developer of software tools, expressed some optimism that his company will keep its federal agency customers, which include the Commerce, Defense, Education and Energy departments.
“There's a hurricane going on in the federal government right now, and we're in the basement,” Lynch said, “So we're kind of protected, but, you know, we're still not immune to it.”
President Donald Trump declined to rule out a recession this year as the economy stutters from his efforts to impose tariffs and rebuild the U.S. manufacturing sector, acknowledging in an interview broadcast Sunday that “it takes a little time” before Americans will see a payoff from his policies.
Trump’s recognition of the turbulence in the U.S. economy was a reversal from previous cheering that his policies would deliver quick victories to voters and businesses, and it stood in contrast to reassurances from his own advisers on Sunday that no recession was in sight. Trump also downplayed the dropping stock market despite years in which he has claimed credit for its rise, saying in the Fox News interview that “you have to do what’s right” even if markets don’t like it.
The recognition of the economic disruption was notable given that Trump swept into office in part because of voter discontent about years of inflation under President Joe Biden. But that inflation slowed in Biden’s final year in office, and most economists say that Trump inherited a fairly strong and stable economy.
Trump pushed Biden on the stock market, inflation and the overall economy — all issues on which he is now telling voters to look the other way.
Asked by Fox News anchor Maria Bartiromo whether he was expecting a recession this year, Trump said: “I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. And there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us.”
Trump said his economic policies shouldn’t be swayed by the broad-based market sell-off in recent weeks as he has moved to impose tariffs on countries around the world, most notably hiking levies on China. Mexico and Canada are also facing large new tariffs, although Trump has repeatedly postponed them.
The S&P 500 index is down 3.8 percent since Trump was inaugurated Jan. 20, and down 6 percent from its all-time high on Feb. 19. Consumer sentiment is at a 15-month low as worries compound about layoffs and rising prices.
“If you look at China, they have a 100-year perspective. We have a quarter. We go by quarters, and you can’t go by that. You have to do what’s right,” Trump said about the stock market. “What we’re doing is we’re building a tremendous foundation for the future.”
He said that businesses always say they want “clarity” about tariffs, but that’s “almost a sound bite.” He added that tariffs “may go up. I don’t think we’ll go down.”
The president has repeatedly postponed tariffs against Canada and Mexico but said in the interview that April 2 was the final deadline. Separate 25 percent tariffs on steel and aluminum imports are set to go into effect Wednesday.
Inflation has hit Americans in other ways that Trump has sought to downplay. As avian influenza has driven egg prices, which started to rise under Biden, even higher under Trump, the president has also started to tell Americans not to focus on them. Trump on Saturday reposted an article by the conservative activist Charlie Kirk, whose headline was “Shut Up About Egg Prices — Trump Is Saving Consumers Millions.”
Trump and his top aides have started to try to shift the discussion around inflation after hammering Biden and Vice President Kamala Harris about it for years. Trump and his team say their “America First” economic policies are focused more on building jobs and opportunities inside U.S. borders than prioritizing low prices for consumers.
“Access to cheap goods is not the essence of the American Dream. The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility and economic security,” Treasury Secretary Scott Bessent told the New York Economic Club on Thursday. “For too long, the designers of multilateral trade deals have lost sight of this. International economic relations that do not work for the American people must be reexamined.”
Commerce Secretary Howard Lutnick told NBC’s “Meet the Press” on Sunday that there were no plans to change the steel and aluminum tariffs — and, unlike his boss, he dismissed concerns about a recession.
The Federal Reserve Bank of Atlanta is now forecasting that U.S. economic output will decline 2.8 percent in the first quarter of 2025 after nearly three years of growth. Economists define a recession as two successive quarters of decline.
Economists repeatedly warned about a looming recession during Biden’s four years in office, but it never materialized.
Americans should “absolutely not” brace for a recession, Lutnick said on the program.
Trump is “going to win for the American people. That’s just the way it’s going to be. There’s going to be no recession in America,” he said. “What there’s going to be is global tariffs are going to come down because President Trump has said, ‘You want to charge us 100 percent? We’re going to charge you 100 percent.’”
Lutnick added: “I would never bet on recession. No chance.”
Trump and his advisers have argued that the end result of his policies will be that prices for U.S.-made goods are lower while foreign-made ones are higher, and that the health of the overall economy will be better once their policies are allowed time to take effect, with a lower deficit and lower interest rates. They point to decisions by Taiwan Semiconductor Manufacturing Co., which announced plans for a $100 billion investment in Arizona, and similar announcements from other major companies as evidence that their efforts are already working.
Many economists disagree with their assessment, saying that tariffs will significantly increase prices, posing a challenge to efforts to lower interest rates. Rebuilding the U.S. manufacturing sector will be far more complex than reimposing trade barriers, some of them say, noting that U.S. manufacturing jobs have been declining for generations because of a complex cocktail of automation, trade policies, the rise of China and shifts in corporate behavior.
And Trump’s vow not to touch the politically popular programs that are the major elements of federal spending — Social Security and Medicare — will make cutting the deficit nearly impossible, economists say, especially as Trump proposes new tax cuts.
“It’s important for people to realize we run $2 trillion deficits and Donald Trump is going to try to balance the budgets of the United States of America,” Lutnick said. “We’re going to bring manufacturing back, that’s where we’re going. … Will there be distortions? Of course. Foreign goods may get a little more expensive, but American goods are going to get cheap.”
2 comments:
There are many reasons for the slowdown. Performative, almost non-existent DOGE cuts are definitely not among them.
The article highlights rising recession risks as companies warn of DOGE-related uncertainties impacting business. Tariffs, government cuts, and layoffs are lowering consumer confidence, causing a market dip. With investors growing cautious, the unpredictable policies could further strain corporate growth and stability.
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