Al Root explains for Barron’s readers how President Trump’s trade dispute with China is affecting American corporations.

When President Donald Trump first took on China over trade, it was easy to ignore because the impact hadn’t hit corporate profits. No longer.

During second-quarter earnings season, companies said essentially the same thing—that they were monitoring tariffs. The market shrugged off trade concerns and stocks rose. Most of those earnings conference calls were held in July, which was before the latest round of tariffs went into effect. September saw a round of levies that encompassed $200 billion worth of Chinese products. Now, on third-quarter calls, companies have begun to spell out tariff impacts in greater detail.

Calculating the ultimate impact of tariffs isn’t easy or precise. A fair calculation would include not only costs but also changes in demand and the possibility of supply-chain disruptions. The result could be significant. The International Monetary Fund lowered its global growth expectations when it released its recent outlook because of, in part, “escalating trade tensions.”

Nearly every industrial company reporting results in October has mentioned tariffs. …

… For now, it appears that many companies are willing to eat the costs, and that could have a big impact on bottom lines. Barclays strategist Maneesh Deshpande’s worst-case scenario is a 25% tariff on all Chinese goods imported to the U.S. Assuming that companies absorb the costs, Deshpande calculates that would shave three percentage points off the projected 10% growth for S&P 500 earnings in 2019.