Daimler cuts 2018 profit outlook on trade war and EU emissions control

Daimler is one of the biggest global companies to cut its profit outlook and blame trade tensions. (Reuters)
Updated 21 June 2018
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Daimler cuts 2018 profit outlook on trade war and EU emissions control

  • Daimler’s revised forecast comes as US President Donald Trump is proposing to impose tariffs on imported vehicles
  • Daimler is one of the biggest global companies to cut its profit outlook and blame trade tensions

FRANKFURT: Daimler on Wednesday said profit would fall in 2018 as new import tariffs on cars exported from the United States to China would hurt sales of high-margin Mercedes-Benz sports utility vehicles.
Daimler earnings before interest and taxes (EBIT) would now be slightly below the previous year’s level, rather than slightly above, the company said in a regulatory filing late on Wednesday.
Daimler’s revised forecast comes as US President Donald Trump is proposing to impose tariffs on imported vehicles on grounds that trade imbalances on many products threaten US national security.
He is separately promising to impose tariffs on up to $200 billion of Chinese goods. China has warned it would retaliate with levies on US products, potentially including the Mercedes-Benz sport utilities shipped to China from Alabama.
Separately on Wednesday, the chief executive of Volvo Cars warned that higher tariffs could undermine the Chinese-owned automaker’s plans to hire up to 4,000 workers at a new vehicle assembly plant in South Carolina.
Stocks in a wide range of companies have see-sawed in recent weeks as investors tried to assess the risk to corporate profits from the Trump administration’s trade policy.
Daimler is one of the biggest global companies to cut its profit outlook and blame trade tensions. The German industrial firm’s revised forecast came on the same day as reports that German automakers backed a proposal that the European Union drop tariffs on vehicles to defuse trade tensions.
While the United States and China have not yet imposed new tariffs, Daimler said it expects that to occur, and that the automaker will not be able to recover the costs from customers.
“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,” it said in a regulatory filing.
Daimler also said a new vehicle certification process based on stricter fuel efficiency test procedures will hit sales in the second half of the year, and warned that earnings at its Mercedes-Benz Vans unit would suffer because of a vehicle recall for diesel-engined models.
Daimler was ordered last month to recall its Mercedes-Benz Vito vans fitted with 1.6-liter diesel engines because Germany’s motor vehicle authority, KBA, said they breached emissions rules. Daimler has said it will appeal the decision.
As a result, EBIT at its Mercedes-Benz Cars division would now be slightly below the previous year, and significantly below the previous year’s level in the vans division, Daimler said.
South Korean automakers fell in morning trade on Thursday, while Japanese peers gained moderately, paring earlier losses.
Japanese and South Korean automakers for the most part do not ship vehicles made in the United States to China. Most of the vehicles sold in China are made locally through their Chinese joint ventures, along with imports from Asia.
But analysts said the US trade spat with China raises concerns about knock-on effects on other countries, like potential US auto tariffs on all vehicle imports.
“South Koreans have higher portions of vehicle imports in the US than peers, making them vulnerable to US potential tariffs,” Kwon Soon-woo, an analyst at SK Securities, said.


Apple Watch, FitBit could feel cost of US tariffs

Updated 20 July 2018
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Apple Watch, FitBit could feel cost of US tariffs

SAN FRANCISCO: The latest round of US tariffs on $200 billion of Chinese goods could hit the Apple Watch, health trackers, streaming music speakers and other accessories assembled in China, government rulings on tariffs show.
The rulings name Apple Inc’s watch, several Fitbit Inc. activity trackers and connected speakers from Sonos Inc. While consumer technology’s biggest sellers such as mobile phones and laptops so far have faced little danger of import duties, the rulings show that gadget makers are unlikely to be spared altogether and may have to consider price hikes on products that millions of consumers use every day.
The devices have all been determined by US Customs and Border Patrol officials to fall under an obscure subheading of data transmission machines in the sprawling list of US tariff codes. And that particular subheading is included in the more than 6,000 such codes in President Donald Trump’s most recent round of proposed tariffs released earlier this month.
That $200 billion list of tariffs is in a public comment period. But if the list goes into effect this fall, the products from Apple, Fitbit and Sonos could face a 10 percent tariff.
The specific products listed in customs rulings are the original Apple Watch; Fitbit’s Charge, Charge HR and Surge models; and Sonos’s Play:3, Play:5 and SUB speakers.
All three companies declined to comment on the proposed tariff list. But in its filing earlier this month to become a publicly traded company, Sonos said that “the imposition of tariffs and other trade barriers, as well as retaliatory trade measures, could require us to raise the prices of our products and harm our sales.”
The New York Times has reported that Trump told Apple CEO Tim Cook during a meeting in May that the US government would not levy tariffs on iPhones assembled in China, citing a person familiar with the meeting.
“The way the president has been using his trade authority, you have direct examples of him using his authority to target specific products and companies,” said Sage Chandler, vice president for international trade policy at the Consumer Technology Association.
The toll from tariffs on the gadget world’s smaller product lines could be significant. Sonos and Fitbit do not break out individual product sales, but collectively they had $2.6 billion in revenue last year. Bernstein analyst Toni Sacconaghi estimates that the Apple Watch alone will bring in $9.9 billion in sales this year, though that estimate includes sales outside the United States that the tariff would not touch.
It is possible that the products from Apple, Fitbit and Sonos no longer fall under tariff codes in the $200 billion list, trade experts said. The codes applied to specific products are only public knowledge because their makers asked regulators to rule on their proper classification. And some of the products have been replaced by newer models that could be classified differently.
But if companies have products whose tariff codes are on the list, they have three options, experts said: Advocate to get the code dropped from the list during the public comment period, apply for an exclusion once tariffs go into effect, or try to have their products classified under a different code not on the list.
The last option could prove difficult due to the thousands of codes covered, said one former US trade official.