Business

Daimler warns US-China trade war will hit its profits

Posted June 20, 2018 8:51 p.m. EDT

— German automaker Daimler has cut its profit forecast, blaming the emerging trade war between the United States and China.

Daimler, the parent company of Mercedes-Benz, said in a statement late Wednesday that "the decisive factor" for the change in its outlook was the expectation that China will raise tariffs on vehicles imported from the United States.

Beijing has said cars are among the $50 billion worth of US products on which it will impose new tariffs of 25%. The measures are in retaliation for the Trump administration's tariffs on a similar amount of Chinese goods. The first waves of tariffs by both sides are expected to take effect on July 6.

Daimler said the Chinese tariffs will result in "fewer than expected SUV sales and higher than expected costs," which won't be completely passed on to customers.

"This effect cannot be fully compensated by the reallocation of vehicles to other markets," the company said.

Mercedes has a plant in Vance, Alabama. The company has said previously the majority of the SUVs it produces in Alabama are exported around the world but declined to provide China-specific data.

Daimler says it now expects its 2018 earnings before interest and taxes to be slightly below last year's level. Its earlier forecast had been that earnings would be slightly higher.

It cited several other factors that also contributed to the gloomier outlook, including a new worldwide certification process for light vehicles, a recall of diesel vans, and declining demand for its buses in Latin America.