FedEx Chief Executive Officer Fred Smith is putting the blame squarely on politicians, including U.S. President Donald Trump, for a gloomy forecast that sparked the biggest share rout since 2008.
U.S. Trade tariffs, China’s “mercantilism,” and the U.K.’s negotiations to leave the European Union are all weighing on trade and economic growth, Smith said in a conference call late Tuesday. That prompted (FDX) to slash its profit forecast for fiscal 2019, implement an employee buyout, and cut international delivery capacity.
“Most of the issues that we’re dealing with today are induced by bad political choices,” said Smith, a longtime Republican supporter who on earnings calls rarely misses an opportunity to champion free trade.
Trump, who called himself “a Tariff Man” in a tweet, applied a 10% duty on $200 billion of Chinese goods in September and has threatened to raise the levy to 25% in January. During a summit in Argentina earlier this month, he and Chinese President Xi Jinping agreed to a 90-day truce to provide time to work out a deal. Trump has also slapped tariffs on goods such as steel and aluminum from other countries.
Smith’s 2016 political contributions went to such moderate Republicans as Ohio Governor John Kasich and former Florida Governor Jeb Bush. Smith also gave to Mitt Romney in 2012. While most of his donations have gone to Republicans, he has also crossed the aisle for moderate Democrats, donating to Montana Senator Jon Tester’s successful re-election campaign and a losing effort by North Dakota’s Heidi Heitkamp to retain her Senate seat.
Trade growth would pick up if only the politicians would get out of the way, Smith said. The internet and smartphones have created “this tremendous bottom-up business ecosphere” where small companies anywhere in the world can sell goods and have them shipped to consumers within two days.
“The good news is, with a change in policy, they could turn it around pretty quick, too,” Smith said. “So, fundamentally, we think trade will continue to grow.”
FedEx plunged 12% to $162.51 at the close in New York, the biggest drop since December 2008. The company cut its profit forecast Tuesday, citing sluggish trade flows and weak economies outside the U.S.