Merkel’s nightmare as German car giants become first victims of Trump trade war | City & Business | Finance



Daimler, which owns Mercedes, has plunged 4.2 percent on the stock market this week, BMW has shed 3 per cent and Volkswagen is down 3 per cent.

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And BMW warned of needing “strategic options” as trade tensions intensify.

Daimler said in a statement: “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.”

Harald Hendrikse, analyst at Morgan Stanley said “Daimler won’t be alone”.

The EU has today retaliated to Mr Trump’s new tariffs on imported aluminium and steel by imposing its own levies on a range of US goods imported into the bloc.

And if China follows suit it could cause trouble for Germany’s car manufacturers twice over.

German car firms have built factories and invested heavily in the states that now back the policies of Donald Trump, and now they are expected to be the biggest losers from exports from the US.

If China retaliates to the latest round of US tariffs, BMW cars built in South Carolina and Daimler-owned Mercedes in Alabama will be subject to the new massive 40 per cent tariffs for goods going in China.

Neil MacKinnon, Global Macro Strategist at VTB Capital told that the main risk for the global economic recovery is an escalation in a trade war as America’s trade partners retaliate against President Trump’s plans to raise tariffs on US imports.

He said: “A trade war is self-defeating as it hurts consumers by raising prices and hurts exporters as costs go up. The EU, which is itself protectionist as the single market is designed to protect EU big business and Big EU farmers, needs to be careful given that the Euronext economies are experiencing a slowdown in activity.”

By taking the fight to German carmakers, Mr Trump is taking out two birds with a single stone as the main US brands – unlike German firms – will not feel the financial pinch from rising tariffs in China.

In March President warned on Twitter: “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a tax on their cars which freely pour into the US.

“They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

Mufid Sukkar, Director at the World Trade Center Cyprus and Chief Strategy Officer for global business group Nest Investments told that “a global trade war seems more likely with every passing day.”

He said: “President Trump creates headline after headline inching us closer to that reality. Experts are united in arguing that it is counter-productive, short-sighted and liable to attract counter measures.

“Pro-trade voices still echo loud and clear around the world. Even as the US is becoming more insular, China is pushing ahead with its Belt and Road Initiative to develop thousands of infrastructure projects like ports, railways, energy and utilities.”

“Trade between the countries involved in the initiative already accounts for more than a quarter of world trade overall.

However, Mr Sukkar says that the current “protectionist mood” won’t last for long.

He said: “Populists in senior government posts may not like it, but no country is likely to stick to a protectionist, isolationist position beyond a single politician’s term in office.

“Today’s protectionist mood will not, and cannot, last.”


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