US-China trade row hits carmaker Daimler; firm cuts profit forecast

Company expects fewer Chinese customers to buy Mercedes-Benz SUVs because of tariffs on cars imported from America

PUBLISHED : Thursday, 21 June, 2018, 4:32pm
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Carmaker Daimler became the most visible global corporation to cut its profit outlook and blame it on escalating trade tensions between the US and China, saying fewer Chinese customers will buy Mercedes-Benz SUVs because of tariffs Beijing is slapping on cars imported from America.

Just two months after projecting higher profits, the German firm said late on Wednesday that its full-year earnings, excluding some items, will be slightly lower than last year. Much of Daimler’s more than US$1 billion of C-Class sedans and GLS and GLE crossovers exported from the US last year went to China, and they are now caught up in retaliatory tariffs China announced last week in response to President Donald Trump’s levies on US$50 billion worth of Chinese goods.

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With the rising prospect of an all-out trade war, few industries will be spared and more companies may have to follow Daimler, said Nicholas Smith, a strategist at CLSA Securities in Tokyo. MillerCoors, the maker of Miller Lite and Coors Lite, warned last week that US tariffs on aluminium imports could result in a US$40 million hit to its bottom line.

“Taking the cynic’s view, I think there will be a lot of companies needing to cut sales forecast and this will be an incredibly convenient reason to blame it on,” Smith said. “The Europeans will take a hit on this, the Chinese are going to find this very bumpy and it’s in the nature of a trade war that everyone loses.”

The US$50 billion in tariffs announced by Trump and China’s in-kind response may just be a start in the escalating conflict. On Monday, Trump said he had instructed the US trade representative’s office to identify US$200 billion in Chinese imports for additional tariffs of 10 per cent.

China puts tariffs on US$50 billion of US goods after Donald Trump kicked off trade war

He said the US would impose tariffs on another US$200 billion after that if Beijing retaliated. The range of products that could eventually be taxed by Trump is approaching the value of all US imports from China last year – about US$505 billion.

On Thursday, a Chinese commerce ministry spokesman reiterated that China was “fully prepared” to respond to any new list of US tariffs on Chinese exports.

Daimler and its German rival BMW AG are among the carmakers most affected by China’s additional tariffs against American-made cars – more so than US car manufacturers, according to Evercore ISI. Daimler and BMW will ship just over 100,000 vehicles to China from the US this year, Evercore estimated in April – almost US$7 billion worth of goods.

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“Fewer than expected SUV sales and higher than expected costs – not completely passed on to the customers – must be assumed because of increased import tariffs for US vehicles into the Chinese market,” Daimler said in its statement.

The company called this “the decisive factor” in its revised outlook.