The global economy’s death by a thousand tariffs continues and Nokia hit by a double whammy, by virtue of the resulting weaker dollar
Nokia has cut its 2025 profit forecast by up to €310 million, blaming the shortfall on currency headwinds from the weaker USD and tariffs. The largest headwind is currency fluctuations (particularly the weaker USD), an approximately €230 million negative impact (€140 million operationally and €90 million from non-cash venture fund currency revaluations). Also, the current tariff landscape is expected to impact full year operating profit by €50 million to €80 million.
While the current US administration believed that tariffs were traditionally thought to strengthen currencies via improved trade balances, they have instead sparked global risk aversion, driving capital away from the US dollar, leading it to fall.
The effects can be seen around the world with the Bank of Korea’s Composite Business Sentiment Index (CBSI) for June falling to 90.2, revealing growing pessimism among businesses. ING Think attributed these trends to, among other things, uncertain US trade policies, which heavily impact South Korea’s export-driven industries.
As we recently reported, component supply data from TrendForce describes Q3 as a “subdued peak season” and noted that smartphone demand remains uncertain for the rest of the year. Despite ongoing Chinese subsidies, consumer demand appears mostly fulfilled, and the boost from US tariffs has faded. As a result, demand for key smartphone memory components like eMMC is weak – indicating limited sales ahead, driven only by normal replacement cycles.
Outside our control
Nokia is just the latest to be struck by the force majeure economy the world it trying to navigate. The company said its underlying business performed as expected through the first half, however, considering currency and tariff headwinds which are outside its control and have transpired since its Q1 results, it feels it is “prudent at this point to lower its operating profit outlook range”.
Nokia therefore lowered its comparable operating profit outlook range to €1.6 billion to €2.1 billion (previously €1.9 billion to €2.4 billion). Nokia’s guidance for free cash flow conversion from comparable operating profit remains 50% to 80%. Tellingly, its guidance is now based on a €:$ rate of 1.17, while the currency rate used in January was 1.04.
In the second quarter, based on its preliminary financials, Nokia expects to report net sales of approximately €4.55 billion and comparable operating profit of €300 million. The Q2 comparable operating profit includes a negative impact from its venture funds of €50 million primarily related to currency. Nokia will release its second quarter and half year 2025 financial results on 24 July.
