Here's Why Shares in United Airlines Sagged This Week

Shares in United Airlines (NASDAQ: UAL) fell by 14.2% in the week to Friday morning. The decline came in a tumultuous week for the markets, driven by the tariff actions announced by the U.S. administration. While the drive to ensure a level playing field in international trade is entirely understandable, the immediate imposition of tariffs will naturally create, at the least, a period of instability as the global economy adjusts.

Why United Airlines will be impacted

As a transportation company and an airline with relatively large exposure to transatlantic travel, United is susceptible to changes in consumer discretionary spending and corporate travel plans, which are both likely to be negatively impacted by tariffs and similar actions.

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Indeed, airlines like United and Delta Air Lines have already been negatively impacted by the previous tariff actions imposed on select foreign countries. Both airlines have walked back near-term guidance in response to a softening of end market conditions as the tariffs have created a climate of uncertainty.

As such, it's no surprise that United Airlines stock sold off this week in response.

Image source: Getty Images.

What's next for United Airlines?

It's tough to know how things will pan out from here. An extended trade conflict would not be great news for the global economy and the transportation industry, and United would suffer in that scenario.

A more optimistic view is that the tariff actions may be an opening gambit to ultimately agreeing on new trade deals. Similarly, they might be a shot across the bow, signaling other countries to level up the playing field regarding international trade and stop imposing restrictive trade practices on America's exports. Time will tell.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.