Shares in United Airlines (UAL -15.62%) fell by 14.2% in the week to Friday morning. The decline came in a tumultuous week for the markets, driven by the tariff actions announced by the U.S. administration. While the drive to ensure a level playing field in international trade is entirely understandable, the immediate imposition of tariffs will naturally create, at the least, a period of instability as the global economy adjusts.
As a transportation company and an airline with relatively large exposure to transatlantic travel, United is susceptible to changes in consumer discretionary spending and corporate travel plans, which are both likely to be negatively impacted by tariffs and similar actions.
Indeed, airlines like United and Delta Air Lines have already been negatively impacted by the previous tariff actions imposed on select foreign countries. Both airlines have walked back near-term guidance in response to a softening of end market conditions as the tariffs have created a climate of uncertainty.
As such, it's no surprise that United Airlines stock sold off this week in response.
Image source: Getty Images.
It's tough to know how things will pan out from here. An extended trade conflict would not be great news for the global economy and the transportation industry, and United would suffer in that scenario.
A more optimistic view is that the tariff actions may be an opening gambit to ultimately agreeing on new trade deals. Similarly, they might be a shot across the bow, signaling other countries to level up the playing field regarding international trade and stop imposing restrictive trade practices on America's exports. Time will tell.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.