CEO's Shocking Reaction to Tariff-Induced Stock Plunge

In the fast-paced world of corporate earnings calls, few moments are as dramatic as when a CEO's stock plummets live on air. On Wednesday, April 3, 2025, RH's CEO Gary Friedman found himself in just such a situation. As President Donald Trump announced a historic tax hike on imports, RH's stock tumbled 26% after hours, leaving Friedman with a very relatable reaction: "Oh shit."

The tariff announcement was a seismic event, imposing a 10% baseline tax on imports from all countries and elevated tariff rates on dozens of nations with significant trade surpluses. This move, intended to address what Trump called an economic emergency, sent shockwaves through global markets. The immediate impact on RH was stark, with the company's stock price reflecting the broader market's negative sentiment towards the tariff-induced uncertainty and potential economic consequences.

Friedman's reaction was not just a personal moment of shock; it was a microcosm of the broader market sentiment. Investors were grappling with the uncertainty of tariff policies, which disrupted predictability and made it difficult for firms to forecast corporate earnings, supply chain costs, and global market demand. This uncertainty discouraged expansion plans and new hiring, leading to a volatile environment where investors demanded higher returns for holding riskier assets.

The impact of tariffs on RH was particularly acute because the company sources 72% of its products from Asia, with significant chunks coming from Vietnam and China. The retaliatory tariffs announced by Trump—34% on China, 46% on Vietnam, 26% on India, and 32% on Indonesia—directly affected RH's supply chain. Friedman acknowledged the challenge, stating, "We're all in the same boat," referring to other home decor and furnishing businesses facing similar issues.

RH's response to the tariff announcement was a mix of optimism and caution. The company forecasted revenue growth of up to 13% for the fiscal year, despite the uncertainty. However, the immediate market reaction was negative, with RH's stock sliding more than 7% in midday trading on Friday, April 5, 2025, and declining 62% year-to-date. This suggested that investors were not confident in the short-term effectiveness of RH's mitigation strategies.



The company's plan to work with its manufacturing partners to mitigate the impact of tariffs on margins and costs to customers was a step in the right direction. However, the long-term effectiveness of this strategy remained to be seen. RH's debt levels, mostly due to stock repurchases of $2.2 billion, could limit its financial flexibility in the face of ongoing tariff-related challenges.

The broader implications of Trump's tariff policies were equally concerning. The S&P 500, a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States, had declined. Europe’s Stoxx 600, which covers the performance of 600 companies across 17 European countries, had risen by 12%, driven by a weakening dollar and a surge in European defense stocks. The global economy was on edge, with JPMorgan analysts predicting a recession in 2025 if Trump maintained the massive tariffs.

In conclusion, Friedman's reaction to the tariff-induced stock plunge was a stark reminder of the immediate and severe impact of trade policies on corporate earnings and market sentiment. While RH had a plan to mitigate the impact of tariffs, the short-term market reaction suggested that investors were not convinced of its effectiveness. The long-term consequences of Trump's tariff policies remained uncertain, but the immediate impact was clear: a volatile market and a CEO's candid reaction to the chaos.