Trump trade war: UBS Evidence Lab’s transcript analysis

President Donald
Trump.
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• UBS analysed hundreds of thousands of earnings calls to
  understand which companies are most impacted by US President
  Donald Trump’s trade war.
• UBS found that words like trade, tariffs, and trade war have
  been used more often in the last year than at any other point
  since 2010.
• The automotive sector has discussed the trade war most
  frequently and has seen the biggest impact in terms of share
  price drops.

When it comes to macroeconomic risks for businesses, Donald
Trump’s trade war is pretty much the only game in town right
now.

Trump’s tariffs on goods flowing into the USA from China, the EU,
and Canada — and his threats to increase them — are taking up a
lot of thinking time for major corporations at the moment.

UBS set out to find out which industries are worrying about trade
wars the most using a technology called “Transcriptlytics.” The
proprietary technology allowed the bank to analyse hundreds of
thousands of earnings calls held by companies around the world
over the past few years. In total, the Swiss bank says, it combed
over more than 450 million words of text.

UBS found that perhaps unsurprisingly words and phrases like
trade, tariffs, and trade war have been used significantly more
in the last year that at any other point since 2010. Words from
what the bank calls the “trade taxonomy” have made up roughly 8%
of recent earnings calls. Previously, they had not been higher
than around 2% at any point since 2010.

“Starting at the global level it would be logical that the
frequency of usage of “trade war” related language would have
picked up in recent reporting periods, compared to the prior 6
years of data (the duration of the data set),” UBS’ team of James
Arnold, Joao Toniato, Nick Nelson, and Jad Younes said.

UBS Evidence Lab

Certain industries seem more concerned with President Trump’s
tariffs than others — or at least they are talking about them
more.

That does not necessarily correlate, however, with how much they
will actually be impacted by the trade war, UBS said.

“There are a number of sectors – e.g. luxury and software where
the frequency of ‘trade war’ language has risen and the sectors
have outperformed, i.e. the market appears to be sanguine about
the potential risks.”

There are of course sectors that are both fearful of tariffs and
seeing an impact already. The automotive industry has both the
most frequent discussion of the trade war and the biggest
negative impact in terms of share price drops in the sector.

Auto companies are particularly worried about the trade war given
that Trump has threatened to
slap tariffs on the car industries of Japan and the EU. A
possible tariff of 25% would mark a major hit to the
profitability to automakers. Just this week,
Swedish automaker Volvo postponed a $30 billion IPO, citing
uncertainty around the trade war.

The chart below, compiled using Evidence Lab data, shows the
usage of trade war related words in earnings calls, alongside the
sector’s performance since the beginning of the trade war:

UBS