Daimler expects lower 2018 earnings due to new tariffs

Mercedes-Benz's profits will be probably lower this year because of trade tensions over tariffs with China parent company Daimler warned

In a tit-for-tat response to the U.S. moves, Beijing announced 25% import tariffs on $50bn of USA products last week, including cars, which kick in on 6 July, following a similar move from Donald Trump. UBS Group set a €92.00 ($106.98) price objective on Daimler and gave the company a "buy" rating in a research note on Thursday.

He is separately promising to impose tariffs on up to $200 billion of Chinese goods.

Mercedes has a plant in Vance, Alabama. Cars manufactured in North America were up until recently sold on the Chinese market at lower tariffs.

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. 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.

Daimler said its profits would be affected by new Chinese tariffs imposed on USA imports.

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Daimler said late Wednesday that it now sees fewer SUV sales and higher costs at its Mercedes-Benz Cars division than previously expected because of the tariffs, and "this effect can not be fully compensated by the reallocation of vehicles to other markets". The Mercedes-Benz Cars segment offers premium vehicles of the Mercedes-Benz brand, including the Mercedes-AMG and Mercedes-Maybach brands; and small cars under the smart and Mercedes me brands, as well as electric mobility products under the EQ brand.

It also said there would be a further negative effect on earnings in the second half of the year in connection with the new certification process WLTP (Worldwide Harmonised Light Vehicles Test Procedure). Daimler has said it will appeal the decision. It operates through Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses, and Daimler Financial Services segments.

This effect, Daimler said, can not be fully compensated by the reallocation of vehicles to other markets.

"South Koreans have higher portions of vehicle imports in the U.S. than peers, making them vulnerable to United States potential tariffs", Kwon Soon-woo, an analyst at SK Securities, said.

In late morning trading in Frankfurt, Volkswagen was down 2.4%, while Daimler was more than 4% lower.

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