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 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:
Russian steelmaker MMK has delayed the launch of a project in Turkey, which was expected to add $90-$100 million to its core earnings, due to uncertainty created by global trade wars, the company said. Siemens Healthineers plans to cushion the impact of U.S.-China trade tensions by changing its supply routes to ship goods from its European factories. The firm expects tariffs to have a low single digit million euro impact on Healthineers' results this year, which could rise to a double-digit million euro effect next year. German automaker BMW said it would increase suggested retail prices of the relatively high-margin X5 and X6 SUV models by 4 percent to 7 percent. The company has said that it would be unable to "completely absorb" a 25 percent Chinese tariff on imported U.S.-made models. China-based car dealers said Mercedes maker Daimler moderately raised prices in the country of its GLE midsize SUV which is produced in Alabama. Daimler is looking at ways to mitigate the impact of the trade tensions, including reviewing whether to shift some U.S. production to Asia. The company blamed tariffs for a 30 percent drop in second-quarter profit. Wind turbine maker Siemens Gamesa warned that trade tensions would drive up U.S. costs by 2 to 4 percent, depending on the product and whether further tariffs are imposed. The company is working to reduce the impact on margins by optimizing its supply chains. French electrical equipment company Schneider Electric foresees growth slowing in the second half of the year and expects 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 said, adding that the direct impact of trade war risks were currently negligible. Fiat Chrysler cut its 2018 outlook, hurt by a weaker performance in China. Its operating profit for the second-quarter was negatively impacted by China import duty changes. French mining group Eramet warned that current favorable markets could be hurt by trade rows. Philips confirmed its sales growth target for this year but added that trade worries and the consequences of Brexit continued to cause uncertainty. Finnish steel maker Outokumpu sees a double impact from the U.S. tariffs, with surging imports to Europe resulting in heavy price pressure, whilst in the Americas base prices have risen, benefiting local manufacturers itself. Fellow Finnish company Valmet said tariff increases could derail the recovery and depress its medium-term growth prospects. Chinese-owned Volvo Cars 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. The Alliance of Automobile Manufacturers, whose members include General Motors, Volkswagen AG and Toyota, 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 U.S. tariffs announced in 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 it sees underlying operating profit 20 percent below analysts' estimates in the first half, blaming wire rod costs partly driven up by tariffs. Swedish lock maker Assa Abloy sees a further increase in steel prices in the second part of the year in the U.S., partly due to new import tariffs. Austrian steelmaker Voestalpine said about a third of its U.S. sales would be impacted by import tariffs, adding it was talking to its customers about who would bear the cost. 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."