Minnesota’s bedrock public companies grasp for control as uncertainty swirls

Businesses always deal with uncertainty, but this year has stretched their capacity for it to new limits.

Tariffs have fueled much of this — their issuance, postponement, increase, reductions and threat of more. The most recent action coming last week with a U.S.-China deal to lower tariffs for 90 days.

Most Minnesota public company executives mentioned trade and economic uncertainty during their latest quarterly calls, with several pulling guidance for the rest of the year. Companies have resorted to more recessionary behavior, focused on controlling costs rather than investing for growth.

“It’s anybody’s crystal ball to what happens if the tariff noise continues for six months, nine months,” said CEO Russ Becker on New Brighton-based APi Group’s earnings call earlier this month.

Simply put, this year’s best-laid plans went out the window.

The decisions made by Minnesota’s business leaders in this moment will influence prices, product availability and job growth — possibly for years to come.

President Donald Trump believes tariffs will help the trade deficit in the long term and bring more manufacturing back to the U.S., justifying the short-term pain.

But the tariff uncertainty is just one layer in the economy’s tenuous moment. Higher interest rates and consumer sentiment lower than during the 2008 recession are also inflaming anxiety.

With supply chains in flux, companies have moved into crisis mode, concentrating on immediate needs. Many leading economists and business leaders worry investments will be put off, stalling or lowering growth.

Paul Vaaler, a professor at the University of Minnesota’s Law School and Carlson School of Management, says, “That’s the worst thing for all of us right now.”

Few have a better view into the effects of tariffs than Eden Prairie-based C.H. Robinson, one of the largest logistics providers in the world. It’s not a pretty picture.

CEO Dave Bozeman said: “The new tariffs and fluid trade policies have created market uncertainty and a lack of clarity, making planning activities more difficult.”

This, he adds, has caused “many customers to adopt a wait-and-see approach until they understand the impact on consumer spending and global demand.”

The 145% U.S. and Chinese tariffs are now on pause for 90 days, but most goods from China will still be subject to a 30% levy. Products from most other countries will carry a 10% charge.

Companies are starting to add up the financial damage.

In late April, 3M estimated tariffs will add $850 million annually to its costs. Solventum, its now-standalone health care spinoff, earlier this month placed its risk between $80 million and $100 million, and Sleep Number said the same. Polaris placed the cost at $200 million to $240 million.

3M officials said the tariff costs could mean a 5% hit on earnings.

Few industries will be spared some effect from tariffs — or the consumer negativity that may persist even if tariffs are scrapped.

Minneapolis-based U.S. Bancorp doesn’t have a lot of direct exposure to imports, but its customers do. Last month the bank said it “continues to monitor economic uncertainty ... and other economic factors that may affect the financial strength of corporate and consumer borrowers.”

Kurt Zellers, CEO of the Minnesota Business Partnership, said Monday while his organization’s members — which represent one-sixth of jobs in the state — are affected in different ways by the tariff debate, they consistently say they are currently in a “wait-and-see mode.”

“Ultimately, predictability is the best economic sentiment for health care, agriculture, manufacturing, financial services and medtech, which are the cornerstones of Minnesota’s headquarters economy,” he said.

The Federal Reserve strikes a similar tone. At its May 7 policy meeting, the Fed maintained the current interest rate — citing “uncertainty” as the primary factor. Add persistent inflation that has already affected costs for Minnesota’s companies, and it can be a tenuous situation, leaders said.

With $600 million of parts and products flowing between the U.S. and China annually, 3M is counting on tariff relief.

“We’re identifying a number of ideas to adjust product sourcing and logistics flows to mitigate at least a part of the impact, some of which are no-regret moves regardless of where trade policies eventually settle,” 3M CEO Bill Brown told analysts April 22.

Like so many chief executives in Minnesota and around the world, Brown stressed the “uncertain macroenvironment” the company will be dealing with for the foreseeable future.

“In this environment, it’s critical for us to focus on what we control.”

Few companies have yet to talk about mass layoffs, but when they talk about “efficiencies,” that often means at least some cutbacks or frozen positions.

Polaris calls it the recessionary playbook, keeping a close eye on costs and preserving as much cash as possible.

The Medina-based manufacturer of ATVs, snowmobiles, motorcycles and boats has faced a slowdown in the powersports industry since the end of the pandemic.

Polaris recorded a loss for the first three months of the year, after a planned reduction in manufacturing mixed with low consumer confidence produced an even worse environment for the industry.

“Our commitment remains to stay focused on navigating these challenges and positioning Polaris for sustained long-term success,” CEO Mike Speetzen said in an April earnings call. “Every day seems to bring a new headline or new information, so we’re staying focused, keeping a level head and being proactive.”

He also said the company cut back spending, including travel and “a selective near-term pause on hiring.”

General Mills is looking to cut $100 million in costs as it grapples with lower demand and a recently revised outlook that points to a sales decline for the fiscal year that wraps in May.

“Coming into this year, we thought the consumer environment would improve as the year got on, and that hasn’t really been the case,” General Mills CEO Jeff Harmening told investors in March.

“We know that in uncertain times, consumers become more anxious about the future, the possibility of losing their job,” writes Andrea Raffo, research director at the Minneapolis Fed. “They start saving more and consuming less.”

That is affecting companies like Minneapolis-based Target, which had a decent holiday season only to be hit in February with lower sales as consumers tightened budgets. Food prices, led by eggs after bird flu hit flocks, again increased.

UnitedHealth Group, No. 1 on the Star Tribune 50 list of Minnesota’s public companies, on Tuesday shook up the C-suite, reappointing Stephen Hemsley as CEO and canceling financial guidance. One thing it said was that Medicare Advantage spending is not following expected patterns.

Target in March — along with Walmart and other large retailers — signaled more trouble ahead as tariffs increased their costs at a time consumers were becoming more wary.

Medtronic, Target and Best Buy, three of Minnesota’s five largest public companies, report earnings over the next two weeks.

Target “expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year,” the company said in March.

Best Buy previously said tariffs on China could push sales down for the year.

That same inflationary pressure is hitting airline demand. Minneapolis-based Sun Country Airlines was among several airlines reducing financial guidance for the year. Asked by an analyst in March “what Sun Country looks like in a recession,” Chief Financial Officer Dave Davis said: “We get smaller.”

“We’ll match the size of this airline to the demand environment,” Davis said. “And if that means parking aircraft, if it means tearing aircraft down, if it’s longer term, that’s how we’ll respond to sustained reductions in demand.”

Delta Air Lines CEO Ed Bastian said during a call with analysts the company’s growth had “largely stalled” because of “broad economic uncertainty around global trade.”

For Apogee, an architectural glass company based in Edina, the decline in the commercial real estate market is hitting hard, especially in downtowns where more designed buildings like towers and stadiums require more glass.

“Manufacturing plants, data centers and warehouse builds have been the primary driver of nonresidential construction growth the past few years,” Ty Silberhorn, Apogee’s president and CEO, said on an earnings call. ”These are segments where we have historically had less presence."

The company has been restructuring the past few years, closing its Toronto plant, for instance. But it will continue into a new phase now as it mitigates effects from tariff costs and other economic factors.

Apogee also has passed on costs on as many products as it can.

Ecolab instituted a tariff upcharge on certain items.

Figuring out how to leverage the St. Paul-based company’s 125 factories around the world will give it even more options to work around tariff policies, said CEO Christophe Beck in an interview last month.

“We’ve always been practicing ‘local for local,’ for service reasons; for sustainability reasons; for ethics reasons; for logistic reasons,” Beck said. ”We didn’t plan that way for tariffs."

The key is flexibility and controlling whatever factors Ecolab can, he said.

“People are scared out there, generally, not just our people,” Beck said. “The way I lead is basically to provide some consistency, some confidence, some steadiness and some calm, and those are some of the ingredients in how we’re driving success.”

Leaders in this moment are right to acknowledge the uncertainty and should be willing to hedge their assurances, said social critic Maggie Jackson, author of the book “Uncertain.”

“No one wants a CEO or doctor to come into the room and say ‘I don’t know,’ but studies show leaders who express uncertainty and link it to potential are more persuasive,” she said. “The ‘good stress’ of uncertainty sets you up with what I’d call a batter’s stance. With an unpredictable pitcher, aka the world right now, you want the right stance.”