Recent shifts in U.S. trade policy—particularly the return of tariffs under President Trump—are more than a political issue. They’re a material business risk. Higher input costs, reduced demand, and overall macroeconomic uncertainty are forcing multinational companies to revisit financial projections and stress-test their assumptions. One area now under pressure: impairment testing for non-financial assets such as property, plant, and equipment (PP&E), intangible assets, and goodwill. In this environment, the bar is rising for management teams to detect impairment risks early, respond decisively, and communicate clearly with stakeholders. Missed signals can mean financial restatements, reputational hits, or even regulatory scrutiny.
What’s changing – and why it matters to you
Under U.S. GAAP and IFRS, if the carrying value of an asset exceeds its recoverable value, an impairment must be recognized. That means a non-cash hit to earnings—and often, a very public one. Tariff volatility, demand softening, and cost inflation all threaten the assumptions that underpin asset valuations, from cash flow projections to discount rates.
In short: even if your revenue holds, your balance sheet may still take a hit.
What management needs to watch
- Increased impairment risk in 2025: Multinationals with significant PP&E or intangible assets — especially in industrials, CPG, logistics, and commodities —are on high alert.
- Earnings volatility: Impairments don’t just dent profitability; they affect your ability to forecast and control the narrative with investors.
- Capital planning constraints: Anticipated impairments may delay capital investments or trigger reassessments of past spend.
- Covenant risk: Balance sheet changes could cause unintentional breaches of loan agreements or drive-up cost of capital.
- Reputational impact: Surprise impairments pose tough questions about financial oversight, forecasting accuracy, and resilience.
What smart companies are doing now
Your board’s audit committee will eventually ask how you’re preparing for potential impairments. The real question is: Are you giving them a story that holds up under pressure?
Leading management teams are taking the following actions now:
- Revisit assumptions in valuation models. Stress-test assumptions for tariff levels, input cost increases, and sales forecasts under various trade scenarios. Also, conduct fresh analyses on “Value in Use” and “Fair Value Less Costs of Disposal.”
- Accelerate trigger-based testing. Don’t wait. Material shifts in trade policy or commodity pricing should trigger immediate impairment reviews.
- Tighten cross-functional coordination. Finance, supply chain, legal, and investor relations must be aligned on impairment implications and communication strategy.
- Monitor competitor disclosures. Understand how peers are handling impairments and what expectations that may set for your own disclosures.
- Scenario planning for investor messaging. Be proactive. Prepare talking points and disclosures before impairments hit, not after.
- Track risk upstream. Build early warning systems now. Supplier instability — especially in tariff-exposed regions — can lead to knock-on impairments for your business.
What’s at Stake?
| Risk Type | Impact |
|---|---|
| Profitability | Non-cash impairment charges reduce earnings, impacting valuations and investor trust |
| Balance Sheet | Lower asset values reduce equity, shift ratios, and increase risk of covenant breaches |
| Cost of Capital | Repeated impairments raise credit risk and borrowing costs |
| Forecast Accuracy | Impairments erode confidence in management’s forward-looking visibility |
| Operational Flexibility | Tariff uncertainty can delay capital investment and trigger stranded costs |
| Reputation | High-profile impairments—especially if competitors avoid them—can signal weak financial oversight |
Real-world examples
Several leading companies have already reported or flagged impairments linked to tariffs:
- DuPont – In its Q1 2025 guidance, DuPont warned of a $60M net cost from tariffs. While it did not record an impairment, the company flagged risk exposure tied to inventory and equipment-related costs.
- P&G: $1B in intangible impairments in 2024 due to cost inflation tied to trade policy.
- Teva: Over $750M in impairments combined with long-lived assets and goodwill, citing trade volatility.
- UPS: Took a $46M asset impairment in Q4 2024, citing cost pressures and tariff exposure.
- GM & Ford: Analysts warn of impending write-downs due to aluminum and steel tariffs.
- Bristol Myers Squibb – Reported significant intangible impairments due to tariff-driven pricing volatility
- Harley-Davidson: Withdrew earnings guidance entirely, highlighting reputational and forecasting risk.
If you’re in industrials, automotive, CPG, or logistics, your sector is already under the microscope.
Questions management should be asking today
- Where do we have the most exposure to trade-related cost pressures or demand shifts?
- Have we re-tested asset values against current trade policy developments?
- Are our impairment triggers and policies consistent across regions?
- How are our forecasts incorporating multiple trade scenarios?
- Have we stress-tested our balance sheet for covenant implications?
- Are we preparing investor messaging now for potential impairments later?
- Do we have enough visibility into our suppliers’ financial health?
- Are we investing in external valuation support and transparency tools to validate our assumptions?
You don’t want to be caught flat-footed
Impairments can’t be avoided in all cases, but being surprised by them is. By proactively managing your assumptions, testing frequently, and aligning internal stakeholders, you can maintain investor confidence, mitigate reputational damage, and ensure operational flexibility.
Ready to turn board-level audit concerns into a focused management plan? The Telesto Strategy team can help you apply what’s working across leading companies.
Let’s work together
