Some European companies are rethinking their strategies to cushion the impact of trade tensions between the world’s two biggest economies, the United States and China.
The focus will switch back to China after a truce on tariffs emerged from U.S. President Donald Trump’s meeting with European Commission President Jean-Claude Juncker on July 25.
Trump and Juncker agreed to suspend any new tariffs on the European Union, including a proposed 25 percent levy on auto imports, and hold talks over duties on imports of European steel and aluminum.
However, Trump retained the power to impose tariffs, if no progress is made.
In the case of China, Trump threatened this month that he was ready to impose tariffs on an additional $500 billion of imports.
The United States has already imposed tariffs on $34 billion of Chinese imports. In return, China has levied taxes on the same value of U.S. products.
Below are recent comments from European companies on trade tensions:
- Mercedes maker Daimler blamed U.S.-China tariffs for a 30 percent drop in second-quarter profit announced on July 26 and prefigured in a profit warning last month.
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French electrical equipment company Schneider Electric said on July 26 that it foresaw growth slowing in the second half of the year and expected the first extra costs linked to higher U.S. tariffs, which could reach 20 million
euros.
- “If the trade war escalates we are more concerned about the consequences that it can have on global macro environment,” STMicro’s new Chief Executive Jean-Marc Chery, said on July 25, adding that direct impact of trade war risks were currently “negligible.”
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Fiat Chrysler cut 2018 outlook on July 25, hurt by weaker performance in China. Its operating profit for the second-quarter was negatively impacted by China import duty changes.
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French mining group Eramet warned that current favorable markets could be hurt by trade rows.
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Chief Executive Frans van Houten confirmed Philips’ sales growth target for this year on July 23, but added that trade worries and the unknown consequences of Brexit continued to cause uncertainty.
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Finnish steel maker Outokumpu sees two-fold impact from the U.S. tariffs, with surging imports to Europe resulting in heavy price pressure, whilst in the Americas, base prices have risen throughout spring benefiting local manufacturers, including the company.
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Fellow Finnish company Valmet said tariff increases could derail the recovery and depress its medium-term growth prospects.
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Chinese-owned Volvo Cars (IPO-VOLVO.ST) said it was shifting production of its top-selling SUV production for the U.S. market to Europe from China to avoid Washington’s new duties on Chinese imports.
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German automaker BMW said this month that it would be unable to “completely absorb” a new 25 percent Chinese tariff on imported U.S.-made models and would have to raise prices on the vehicles made in South Carolina.
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The Alliance of Automobile Manufacturers, whose members include General Motors Co, Volkswagen AG and Toyota Motor Corp, also warned on the impact of the tariffs. A study released by a U.S. auto dealer group warned
that the tariffs could cut U.S. auto sales by 2 million vehicles.
- Sweden’s Electrolux said on July 18 that the U.S. tariffs announced at the beginning of July would have an impact of $10 million plus this year. In the third quarter, it expects raw material costs to rise by 0.5 billion Swedish
crowns.
- Belgian steel wire maker Bekaert reported on the same day that it sees underlying operating profit 20 percent below analysts’ estimates in the first half, blaming wire rod costs partly driven up by tariffs.
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Swedish lock maker Assa Abloy’s CEO said on July 18 that he sees an important further increase in steel prices in the second part of the year in U.S., partly due to new import tariffs. He expects price hikes to compensate better for the higher cost in the last six month of the year than in the second quarter.
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Austrian steelmaker Voestalpine said on June 6 that about a third of its U.S. sales would be impacted by Washington’s steel import tariffs, adding that it was talking to its customers about who would bear the cost.
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Norway’s REC Silicon booked an impairment charge of $340 million “due to the market disruption from the curtailment of solar incentives in China, as well as continued trade barriers that prevent access to primary markets inside
China.”
“We need the U.S. and Chinese governments to cooperate in ending the solar trade dispute … to prevent additional job losses and to enhance the value of the solar industry in the U.S. and China.”
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