European second-quarter corporate profits expected to fall 0.7%

The outlook for European corporate health has deteriorated, the latest earnings forecasts showed on Tuesday, as U.S. President Donald Trump's most recent tariff statements created further uncertainty for businesses.

European companies are expected to report a drop of 0.7% year-on-year in second-quarter earnings, on average, according to LSEG I/B/E/S data, below the 0.2% decrease analysts had expected a week ago.

This earnings season is the first to expose the impact of U.S. President Trump's tariff-fueled trade war on corporate health. Trump's tariff policies have changed frequently since April, the most common start of the second fiscal quarter. Some were imposed while others were proposed and then delayed.

From last week, consensus for revenue forecasts meanwhile remained the same, with analysts expecting a 3.0% decrease, compared with a 3.0% drop expected before.

Last week, after weeks of negotiations, President Donald Trump threatened to impose a 30% tariff on imports from the European Union starting on August 1, though EU ministers have voiced their confidence in still closing a deal before the deadline.

The latest estimates compare with a 3.0% increase in earnings and a 0.8% drop in revenues a year ago, the data showed.

This would be the worst quarterly performance in more than a year.

Second-quarter results from Novartis NOVN and Volvo Cars VOLCAR_B expected later this week, might shed more light on how European companies are faring at the start of this reporting quarter.

The biggest second-quarter earnings winners are expected to

be the Irish and Polish companies in the Europe-wide STOXX 600

stock index, with average growth of 88.6% and 67.3%, respectively. Norwegian and Austrian companies, meanwhile, are expected to see earnings fall 19.4% and 8.2%, respectively.

As of Tuesday's close, the STOXX 600 was up about 7.4% year

to date.