Caterpillar’s stock took a beating Tuesday after the construction equipment maker reported that President  Trump’s tariffs are raising costs and eating into profit expectations.

The disappointing guidance from the industrial bellwether helped spark a broad morning sell-off, although the stock market made up most of the losses by the end of the day. Like the U.S. economy, Caterpillar’s fundamentals are strong – it posted record third-quarter profits, rising revenue in all its major markets and brisk demand for its wares.

But investors see storm clouds gathering, not least from the Trump administration’s import duties, which the company estimates will raise its material costs by at least $100 million in the second half of this year.

It’s a story starting to play out across the economy. Companies are reckoning with trade barriers the Trump administration appears to be in no hurry to lower as it eyes a longer-term showdown with China. A number of other firms reporting their third-quarter results are citing higher costs thanks to tariffs:

• United Technologies said it expects tariffs to cost it $200 million next year, double its earlier estimate;

• 3M said “tariff head winds” would raise its costs by $100 million next year;

• Honeywell reported that tariffs could jack up its costs by hundreds of millions of dollars;

• Ford said that metals duties have cost it $1 billion in profits;

• Honda pointed to “hundreds of millions of dollars” in new costs.

Bloomberg notes that “so far, a review of corporate earnings results and conference-call transcripts suggests the number of large global companies harmed by higher tariffs is exponentially larger than those that are helped by them.” A number of others that produce in China are weighing whether to move their supply chains.

The Trump administration is signaling it won’t budge on the steel and aluminum tariffs it imposed in June. Trump himself downplayed the impact of the duties in a Tuesday interview with the Wall Street Journal, telling the paper, “We don’t even have tariffs. I’m using tariffs to negotiate,” and describing the metals tariffs as “small.”

Asked about the risk the tariffs pose to the economy, Trump falsely said: “Where do we have tariffs? We don’t have tariffs anywhere … You know what happens? A business that’s doing badly always likes to blame Trump and the tariffs, because it’s a good excuse for some incompetent guy that’s making $25 million a year.”

And the president is forgoing a symbolic signing ceremony for the revamped North American Free Trade Agreement over the issue, since Canadian officials have refused to participate without guarantees the United States drops the duties on its metals.

Meanwhile, the outlook is bleak for a negotiated peace between the Trump administration and its counterparts in Beijing. White House economic adviser Larry Kudlow confirmed Tuesday that Trump will meet with Chinese President Xi Jinping at the G-20 summit next month in Buenos Aires. But he immediately sought to play down hopes for a breakthrough there, saying a good outcome would constitute agreement “on some basic principles and trading rules.”

Expectations are similarly dim across the Pacific, Bloomberg reports. “Chinese officials – who once hoped to buy their way out of a conflict via purchases of U.S. energy and agricultural exports – are also now bracing for a prolonged fight and focusing on adapting to a ‘new normal’ in relations,” the news outlet writes. “In private, Chinese officials have started to talk less about a potential peace and more about ‘stabilizing’ the relationship with the U.S. to avoid escalation. Progressively tougher rhetoric out of Washington has helped feed the view that the Trump administration is embarking on a strategy to contain China and curtail its economic rise.”

Chris Krueger of Cowen Washington Research Group says the confrontation has tipped into a new Cold War. “There does not seem to be much middle ground here,” he wrote in a Tuesday research note. “The trade policy Pandora’s Box has already been unlocked – it is now more of a question as to whether it is bolted or whether it will fully open.” Krueger wrote that his firm expects the Trump administration to announce tariffs on an additional $267 billion in Chinese imports shortly after the midterms and implement them early next year.