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McDonald’s posts surprise decline in global sales in first quarter McDonald’s and General Motors say Trump’s tariff war is harming business
(about 4 hours later)
Firm was navigating ‘toughest of market conditions’ when Trump’s tariffs worsened wallet pressures on consumers Fast-food company reports 3.6% fall in sales and carmaker says tariffs could cost it as much as $5bn in 2025
McDonald’s posted a surprise decline in first-quarter global sales on Thursday, as demand from cash-strapped diners in its key markets faltered on uncertainty sparked by chaotic tariffs. McDonald’s and General Motors have warned that uncertainty around Donald Trump’s tariff policy is hurting business, hitting sales and knocking profits.
The company was navigating the “toughest of market conditions”, the company’s CEO Chris Kempczinski said, as global comparable sales fell 1%, while analysts on average had estimated a 0.95% rise. The fast-food chain reported a 3.6% fall in sales in its US home market during the first quarter, driven mainly by lower customer numbers as consumers reined in their spending in the face of an unpredictable economic outlook.
The disruptive nature of Donald Trump’s trade policy has worsened wallet pressures felt by lower-income customers in the US and Europe. It was the largest quarterly fall in sales since the Covid lockdowns of 2020, and comes as US measures of consumer confidence plummeted in March and April.
Policy flip-flops have hurt businesses across industries, threatening to push up costs and upend supply chains. McDonald’s chief executive, Chris Kempczinski, said the company was navigating the “toughest of market conditions” as it also reported a surprise 1% fall in global sales in the first three months of the year.
The US economy is struggling, with latest data showing it contracted for the first time in three years in the first quarter, ramping up the chances of a recession in 2025. “Consumers today are grappling with uncertainty,” Kempczinski added.
McDonald’s results echoed recent warnings from restaurant operators Domino’s Pizza, Chipotle Mexican Grill and Starbucks that Americans were spending less on dining out. The company, headquartered in Chicago, has been trying to boost consumer spending on its Big Macs and chicken McNuggets through the launch of a new “value” menu.
The Chicago, Illinois-based company has attempted to spur demand by ramping up its value menu offers, including limited time deals on its burgers and fries, similar to its rivals. Also on Thursday, GM, one of the “big three” Detroit carmakers, cut its profit guidance for the coming year, and cautioned that Trump’s tariffs could cost it as much as $5bn (£3.8bn) in 2025.
Still, comparable sales in the US, McDonald’s biggest market, slumped 3.6% in the first quarter, steeper than a 0.5% drop estimated by analysts, according to the data compiled by LSEG. The carmaker said it was exposed to the costs even after Trump’s announcement that he would scale back some of the duties on foreign cars and parts. The move was designed to give a reprieve to US carmakers, after the domestic industry warned his strategy would increase costs for American manufacturers by tens of billions of dollars.
However, its business segment where restaurants are operated by local partners, stood out with a 3.5% growth compared with last year, led by a sales recovery in the Middle East and Japan. Carmakers subject to a 25% tariff on imports will now not be subject to other levies Trump has imposed, such as those on steel and aluminium. US carmakers will also be allowed to apply for temporary tariff relief on a proportion of the costs imposed for imported parts, although the relief will be phased out over the next two years.
A demand hit in the Middle East showed signs of abating after last year’s widespread informal boycotts of western fast-food chains over their perceived pro-Israel stance in the Gaza conflict. Mary Barra, GM’s chief executive, said in a letter to shareholders that the company now expected to make a pre-tax profit of between $10bn and $12bn this year, including a tariff exposure of between $4bn and $5bn. This compares with previous profit guidance of $13.7bn to $15.7bn.
McDonald’s reported quarterly adjusted net income of $1.92bn, a 2% drop from 2024. Despite the significant hit to profitability from tariffs, Barra’s letter stated the company was “grateful to President Trump for his support of the US automotive industry”.
“We look forward to maintaining our strong dialogue with the administration on trade and other policies as they continue to evolve,” Barra wrote.
Carmakers have been struggling to keep up with Trump’s frequent changes to his plans for sweeping levies, which have also forced Stellantis – the owner of brands including Jeep, Chrysler and Fiat – and German manufacturer Mercedes to withdraw their financial guidance for the year as a result of the uncertainty around tariff policy.
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GM and the other two big Detroit carmakers, Stellantis and Ford, have significant manufacturing facilities in Mexico or Canada which serve the US market, prompting analysts to caution that the trio could be most vulnerable to Trump’s tariffs. Under free trade agreements, which have been in place for decades, parts and cars can crisscross that border many times.
Companies across a range of sectors have been struggling to keep up with changes to tariff policy announced by the Trump White House, which threaten to upend global supply chains and disrupt markets.
Uncertainty and abrupt policy U-turns also appear to be weighing on US consumers, while other hospitality businesses including Starbucks, Domino’s Pizza and Chipotle Mexican Grill have warned that Americans are cutting back on dining out.
It came as official figures showed that the US economy shrank by 0.3% between January and March, down from growth of 2.4% in the final quarter of 2024 and the first contraction since the start of 2022.
US consumer sentiment plunged by 32% to its lowest level since the 1990 recession between January and April, after the announcement of Trump’s tariffs sparked fears of a global trade war. The index of consumer sentiment score is based on a monthly survey asking Americans about their financial outlook.