Mercedes maker Daimler Issues Profit Warning Due to US-China trade clash

Automotive - Mohit Shah - Jun 22,2018

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mercedes make daimler issues profit warning due to us china trade clash

Market shares in Europe’s biggest automakers have fallen abruptly in early trading after Daimler issued a warning that its profits would be knockout this year by new Chinese tariffs on US imports.

It’s a shocking announcement to the investor by Mercedes-Benz maker Daimler which clearly warning that trade tensions would hit sales, while fears of a “tit-for-tat” trade war grew as Europe primed retaliatory tariffs against the United States. After this major announcement, Daimler has become the first major company to issue a profit warning.

The warning comes a day after top central bank chiefs said about a developing trade war between the world’s biggest economies, i.e. US and China; evaluating on business confidence and could force central banks to reduce their forecasts. The revised forecast sparked fears of incomes downgrades across the industry and followed a proposal by U.S. President Donald Trump to enforce tariffs on imported automobiles, arguing that trade inequities threatened U.S. national security.

The company makes Mercedes SUVs in the US and sends them to China, which is considered as its biggest export market. BMW, which has large factories in the US, is also predicted to be affected by the trade war. In a statement, the Daimler specified that “This effect cannot be fully compensated by the reallocation of vehicles to other markets.”

From now onwards, the German carmaker is expected to move more of its production to China. In a tit-for-tat reply to the US moves, Beijing announced 25% import tariffs on $50bn of US products last week, including cars, which will further kick in on 6 July, following a similar move from US President Donald Trump.  It has been also reported that sales of its Mercedes-Benz SUVs would suffer from fresh tariffs on cars exported from the U.S. to China. Also, the German group predicted earnings would now be slightly lesser than last year's level, after previously predicting that profits would increase.

Earlier this month, Daimler was enforced to recall vehicles in Germany found to be fitted with illegal software that covers diesel emissions.