BUSINESS FLASH: Fresh Insights on Nokia's CEO Plans and Tariff Impacts
Nokia executive considers increasing U.S. production to dodge Trump's import taxes
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Nokia's fresh face, Justin Hotard, is open to beefing up the company's U.S. manufacturing presence to combat the repercussions of tariffs that cropped up during former President Donald Trump's regime.
The company anticipates tariffs could knock a whopping $22 to $34 million off its second-quarter comparable operating profit. The value of shares took a 6% nosedive on Thursday following lackluster first-quarter earnings.
Nokia reported a hefty $68.2 million loss in its first quarter, a stark contrast to a profit of $498 million a year prior. However, according to The Wall Street Journal, the company's comparable operating profit tanked a staggering 74% to $177 million.
Analysts had originally expected a profit of $341 million and a net profit of $143 million, WSJ reported, citing FactSet.
Several companies are stepping up their U.S. production game to evade significant tariff blows.
The company attributed a $136 million settlement as a contributing factor to its lackluster first-quarter results. Hotard explained that the settlement stemmed from a customer project issue that had been entirely resolved.
Despite its first-quarter performance, Nokia hasn't revised its 2025 outlook, projecting a profit ranging from $2.2 to $2.7 billion. Yet, Hotard — who has been CEO for just over three weeks — admits reaching the upper limit will be a tough nut to crack.
Hotard sees an opportunity to scrutinize Nokia's U.S. investments, despite minimal demand dip due to U.S. tariffs. According to Hotard, it's not a matter of relocating headquarters, but of examining investments in research and development (R&D) and U.S. manufacturing capacity.
Hotard expressed readiness to expand U.S. manufacturing to bolster resilience against tariffs. As of now, Nokia operates five manufacturing sites in the U.S. "If there are chances to fortify [U.S. manufacturing], with the aim of driving growth in the market, that's one of the aspects I'll scrutinize," Hotard shared.
Implementing strategies to bolster U.S. manufacturing footprint is a growing trend among businesses aiming to dodge steep tariff penalties. Companies like Chobani, Johnson & Johnson, Apple, and Abbott Laboratories have joined the club.
Curious about Trump's Tariffs and their potential labor market impact?
Impact on U.S. Labor Market
- Industries shielded by tariffs may witness an increase in employment due to boosted domestic production (Short-term winners).
- Employment declines might be seen in downstream industries over-dependent on imported goods, leading to a negative cumulative impact on employment across the economy (Short-term losers).
Economic Consequences
- GDP and Wages: Studies foresee Trump's tariffs decreasing long-term GDP by around 6% and cutting wages by approximately 5% (Long-term effects).
- Household Budgets: Tariffs are projected to cost American households an average of $5,200 annually, with marginal job creation advantages (Indirect impact).
- Unemployment: The tariffs are suspected to cause an increase in the unemployment rate over time, although major layoffs aren’t expected owing to labor shortages and company profitability (Indirect impact on employment).
Broad Perspective
Protectionist policies may foster gains in the manufacturing sector employment, but the wider labor market may face challenges due to increased costs and dampened economic activity. However, the implications of expanding manufacturing efforts under Nokia's new leadership have yet to be explicitly addressed in existing sources.
- Nokia's CEO, Justin Hotard, is considering increasing the company's U.S. manufacturing presence to mitigate the effects of tariffs.
- Tariffs could deduct $22 to $34 million from Nokia's second-quarter comparable operating profit, as per the company's predictions.
- Nokia's CEO has expressed a readiness to expand U.S. manufacturing to bolster resilience against tariffs, with Nokia already operating five manufacturing sites in the U.S.
- The implementation of strategies to bolster U.S. manufacturing footprint is a trend among businesses aiming to avoid steep tariff penalties, with companies like Chobani, Johnson & Johnson, Apple, Abbott Laboratories, and now potentially Nokia, joining the club.
- If Nokia chooses to invest more in U.S. manufacturing, it might help shield the company from tariffs, but the impact on the wider economy and labor market remains to be seen.
