Fastenal Co. slumped the most in six months after warning that new U.S. tariffs on China-sourced goods are “directly impacting” customers of the distributor of industrial and construction supplies.

While the company wasn’t hurt much by the first wave of tariffs in the China-U.S. trade war, the outlook changed with duties that went into effect Sept. 24, Chief Executive Officer Daniel Florness said on a call with analysts as Fastenal reported third-quarter earnings Wednesday.

More than 10 percent of Fastenal’s products are made in China, and much of the effect will be felt in its fasteners business, the company said.

“It’s directly impacting the North American supply chain for our customers,” the CEO said. “Therefore it has an impact on our business. Only time will tell what actually happens.”

Shares fell as much as 6.7 percent, the most since April 2018. Fastenal’s peers also slumped Wednesday, with W.W. Grainger Inc. dropping 4.2 percent to $321.19 at 12:01 p.m. and MSC Industrial Direct Co. Inc. down 3.1 percent to $81.60. The stock declines are the latest among a string of industrial companies hit by price inflation.

The trade war weighs on a company that’s been under pressure for missing profit expectations as costs rise. Gross margins, or sales minus the cost of goods sold, fell by a percentage point in the third quarter to 48.1 percent, Fastenal said in a statement Wednesday. It was the second quarter this year that the metric came in below estimates.

‘Disappointed Again’

“Fastenal’s gross margin disappointed again, and may remain challenged amid inflationary pressure and new tariffs on China-sourced goods, ” Bloomberg Intelligence analyst Christopher Ciolino said.

Earnings of 69 cents a share were 2 cents higher than analysts’ estimates compiled by Bloomberg. A 13 percent increase in daily sales was “strong,” Ciolino said.

Trump ordered his administration to levy 10 percent tariffs on about $200 billion in Chinese goods beginning Sept. 24, and to increase the rate in January to 25 percent if Beijing refused to offer trade concessions.