European companies, from carmakers and brewers to airlines, have sounded a warning that US President Donald Trump’s import tariffs are beginning to wreak havoc on their businesses.
For some, the levies are squeezing margins, weighing on sales and prompting often costly efforts to shift production to the US. For nearly all, uncertainty around the eventual level of duties is making effective forecasting almost impossible.
Porsche AG warned of shrinking profit margins this year in part because of US levies, which hit the luxury carmaker’s sales in April and will also affect performance in May. The shares tumbled as much as 7.6% in German trading, and have lost half their value in the past year.
Rival Volvo Car AB announced plans to slash costs by nearly $2 billion as slack demand and trade tensions weigh on the industry. The carmaker withdrew its financial guidance for this year and next because of tariff uncertainty, while Chief Executive Officer Hakan Samuelsson told Bloomberg Television the duties are “disturbing a global company massively.”
Associated British Foods Plc said that with many of its garments manufactured in Asia, its budget fashion chain Primark will see a short-term impact from higher US tariffs. Primark will have to put up prices on some of the items it sells in the US, which is a labor-intensive, costly process, said CEO George Weston.
Even companies that are currently seeing robust demand, like Adidas AG and Deutsche Lufthansa AG, are fretting over the potential impact of the US duties as the year wears on.
The sneaker maker, which reported better-than-expected first-quarter profit, said it was holding off on boosting its full-year forecast because of the trade war. CEO Bjoern Gulden cited uncertainties related to the tariffs “that could put negative pressure” on its forecast later in the year.
Lufthansa also cautioned that it has only limited visibility into the latter part of the year as trade tensions and changing consumer behavior throw the economy into disarray. Europe’s biggest airline group said macroeconomic uncertainty, particularly the US-Europe trade conflict, is clouding forecasts for the key summer season.
Subdued Consumer
AstraZeneca Plc CEO Pascal Soriot said tariffs are not the best way to manage pharmaceuticals and that drugmakers are lobbying the Trump administration not to include medicines. The industry has so far been excluded from levies, despite repeated threats from the US president to impose them.
“We actually believe that a better incentive to attract investment in manufacturing and in R&D is to have a great tax policy that incentivizes companies to invest in the country,” Soriot said on Bloomberg TV. Still, Astra said the impact of any tariffs would be short-lived on the company due to its US manufacturing presence.
Danish brewer Carlsberg A/S is likely to see less impact from tariffs than some rival beermakers because of its small share of the US market, yet indirect inflationary effects on the supply chain, particularly in packaging, could affect prices, CEO Jacob Aarup-Andersen said. What’s more, the global macroeconomic environment remains volatile.
“With the global trade uncertainties we’re seeing at the moment we would expect the subdued consumer to continue for awhile,” Aarup-Andersen told Bloomberg TV.