By Jaspreet Singh

(Reuters) -Shares of Hewlett Packard Enterprise (NYSE: HPE ) slumped 15% on Friday, after the AI-server maker said its annual profit forecast would be hit by U.S. tariffs in an intensely competitive market.

U.S. President Donald Trump imposed 25% tariffs on imports from Canada and Mexico, but exempted some goods from both the countries under a North American trade pact until April 2. His additional 10% duty on Chinese goods — on top of the 10% tariff he levied on February 4 — took effect on Tuesday.

HPE’s comments show that tariffs, though only implemented this week, are already affecting U.S. corporations. Analysts have said the uncertainties surrounding the escalating trade war could cause prices to rise across exposed sectors, including technology and autos.

"Recent tariff announcements have created uncertainty for our industry, primarily affecting our server business," CFO Marie Myers said on a post-earnings call on Thursday. "We are working on plans to mitigate these impacts through supply chain measures and pricing actions."

HPE is set to lose more than $3 billion in market value, if losses hold. At least five brokerages cut their price targets on the stock after the results.

"Companies are frantically trying to work out how tariffs will affect their business and it looks like Hewlett Packard is caught up in the storm," said Dan Coatsworth, investment analyst at AJ Bell.

"Judging by the share price reaction to the results and the tariffs warning, investors don’t have high hopes that it will come out the other side without any scratches or bruises," Coatsworth said.

HPE would also cut jobs to trim costs amid stiff competition from rivals Dell (NYSE: DELL ) and Super Micro Computer (NASDAQ: SMCI ) on rising demand for AI servers.

The companies that sell AI-optimized servers, including HPE, are grappling with margin pressures due to their costly production and rapid transition to the demand for more powerful chips.

"Our impression is that these are temporary issues. After updating our forecasts, we expect a rough second and third quarter, but a recovery in the fourth quarter," Morningstar analyst Eric Compton said in a note.

HPE currently trades at 8.19 times the estimates of its earnings for the next 12 months, compared with 9.74 times for Dell and 10.71 times for Super Micro Computer.