Daimler Issues Profit Warning, Blaming Trade Tensions

Daimler AG says it now expects its earnings this year will be “slightly below” 2017 levels, mainly because of escalating trade tensions between China and the U.S.

The company also cites the slump in demand for diesels and the cost of meeting Europe’s new Worldwide Harmonized Light Vehicles Test Procedure, which takes effect in September.

Daimler previous forecast a slight increase in profits for 2018. The company’s Mercedes-Benz unit set a sales record in the first quarter, aided by SUVs it makes in the U.S. and ships to China.

Now the company frets that the rapidly escalating tit-for-tat tariff skirmishing between the two countries will hike costs on China-bound vehicles that must be at least partially absorbed by the company.

China has been collecting a 25% import tax on foreign-made cars. The country announced last month that it would roll back that tariff to 15% on July 1 in hopes of averting protective U.S. tariffs on incoming Chinese goods.

But when the Trump administration added $50 billion in new tariffs last Friday, China promptly reinstated the 25% duty on imported vehicles, effective July 6. Trump has warned of as much as $400 billion in additional taxes if China reciprocates rather than easing its tariffs.