Carrier, Trane execs talk tariffs, A2L

Carrier and Trane this week reported earnings, with executives chiming in on a range of tariff and A2L issues.

Why it matters: Their comments wrap up first-quarter earnings calls, offering a complete look at suppliers’ read on the residential landscape. 

What’s happening: Unsurprisingly, both companies are navigating additional costs from tariffs, but noted they won’t treat them as profit opportunities, and will instead pass costs through on a dollar-for-dollar basis. 

• “To the extent that there’s a net tariff cost of call it, $100 million, we’re going to put $100 million of price [increases] in place,” said Trane CFO Chris Kuehn.
• The good: Like Lennox and Watsco, both manufacturers remain largely insulated from tariff impacts since most imports come from Mexico, where HVAC products are currently exempt.

Pony up: When questioned about Trane’s approach to passing on costs, Kuehn explained that they’ll implement both price increases and surcharges; however, any surcharges could be “easily removed as we see changes possibly happening here in the tariff environment.” 

• 100 percent of the company’s steel and copper, and over 90 percent of its aluminum, is sourced in the U.S., Kuehn added. Steel and aluminum currently face a 25 percent tariff. 

On A2L: The transition is well underway, with over 75 percent of both companies’ shipments being R-454B equipment during the quarter. Looking ahead, “100 percent of what we’re shipping right now is R-454B,” noted Trane CEO Dave Regnery.

Where’s Waldo: Addressing the reported issues with obtaining R-454B, “[W]e don’t think that will be material,” said Carrier CEO Dave Gitlin. “I think the shortage everyone’s talking about was the canisters that were affecting the overall channel, and we see that resolving itself here in the second quarter.”

What to watch: The Trump administration is negotiating trade deals with numerous countries, which will ultimately determine how tariffs shake out. Trump recently suggested that China’s rate — 145 percent — will likely decrease “substantially.”

• Meanwhile, the exemption on imports from Canada and Mexico remains active, and there’s been no indication of whether it’ll be removed.
• Manufacturers will report second-quarter earnings in July.