FedEx Corp. tumbled the most in five years as President Donald Trump’s order to impose tariffs on at least $50 billion in Chinese imports stoked fears of weaker trade flows.
FedEx, which operates the world’s largest cargo airline, has a bigger presence in Asia and China than United Parcel Service Inc., having gained a major foothold through its 1989 acquisition of Tiger International Inc. FedEx also has a larger international air network than its rival.
“It’s definitely the tariffs on China impacting” the shares, said Kevin Sterling, a Seaport Global Holdings analyst. “If global trade does contract, they’re going to feel it.”
Trump’s order sparked a broad market
rout on concerns that the levies would trigger a trade war and hurt the broadest global economic recovery in years. FedEx Chief Executive Officer Fred Smith warned this week that the tariffs would threaten U.S. economic health.
“The better approach is to encourage open markets and free exchange of products and services and to reduce barriers to trade,” Smith said on a
conference call March 20 to discuss quarterly earnings.
FedEx fell 5.1 percent to $236.27 at the close in New York on Thursday, the most since March 2013. UPS slipped 3 percent.
Asia accounts for about 10 percent of FedEx’s revenue and 5 percent to 7 percent at UPS, according to estimates by Benjamin Hartford, an analyst at Robert W. Baird. China would be the “dominant component” of the Asian figures, he said. FedEx in January opened an air-cargo hub in Shanghai to handle growing cross-border transactions.
Results for FedEx’s fiscal third quarter also may be weighing on the shares, said Lee Klaskow, a Bloomberg Intelligence analyst. While the freight and ground operations performed well at the Memphis, Tennessee-based courier, “there were some concerns” regarding its Express airline unit, the largest at the company, he said.
U.S. Trade Representative Robert Lighthizer within 15 days will propose a list of products that will carry higher tariffs.