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Wall Street braces for tariff fallout; Trade war, higher US interest rate

Investors are worried about the impact on earnings should the United States' trade war with China and other major trading partners escalate. Deutsche Bank in June estimated that an escalation of the dispute to include $200 billion of imports would hit earnings growth by 1-1.5 percent.

Manufacturers across the country are concerned about Washington's recent trade policies, with some saying that uncertainty related to tariffs was already hitting them, according to anecdotes collected by the US Federal Reserve in its Beige Book, released on Wednesday.

Second-quarter corporate earnings seasons kicks into gear starting on Monday, with results on tap from companies including Corning, Ford Motor, 3M Co and Boeing, which has fallen nearly 2 percent since the start of March.

The United States in March said it would impose tariffs on steel and aluminum, and on July 1, Washington and Beijing applied tariffs on $34 billion worth of each other's goods. Trump has threatened additional tariffs, possibly targeting more than $500 billion worth of Chinese goods - roughly the total amount of US imports from China last year.

Trade issues and higher US interest rate could create outward capital flow pressure for India, but risks this year are more moderate compared with 2013, S&P Global Ratings said on Friday.

A strong US. economy and deep corporate tax cuts have fueled a 5 percent increase in the S&P 500 this year, even as Wall Street worries about the tariffs' impact.

Super-charged by deep corporate tax cuts, S&P 500 earnings are expected by analysts to grow 22 percent in the June quarter and 23.1 percent in the September quarter, according to Thomson Reuters I/B/E/S. Estimates for the September quarter are likely to change as companies provide their outlooks over the next few weeks.

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