By Tim Hepher and Karl Plume
Paris/Chicago (Reuters) makers of goods from sportswear to luxury cars and chemicals have painted a bleak picture of consumer and industrial health on Wednesday, touching the stock prices and adding concerns about the damage caused by the trade wars of US President Donald Trump.
Increased rates for all American steel and aluminum imports came into effect on Wednesday, when Trump set up his campaign to re-order global trade in favor of the United States. Europe and Canada quickly took revenge.
Trump’s plans for rates – and their back and forth implementation since he took office in January – have performed industries from cars to energy and uninsured companies and investors. Ensure that the rising costs will restore inflation, and that the acidification of consumer sentiment could herald an American recession, the stock markets have fallen.
During a cereal conference on Tuesday in Carlsbad, California, the news about Trump’s steel and aluminum rates drew moans from the room of business managers of companies, grain processors and traders. The whipsaw pace of policy changes that influence their industry has made it look much longer in the last six weeks, many told Reuters.
“Almost everyone in the economy is struggling to understand wild swings in the Washington policy, and their implications for daily decisions,” said Stephen Dover, main market strategist at asset manager Franklin Templeton.
The constant flip-flopping about rates is paralyzing industries. For example, car makers cannot plan, while there is a threat of 25% rates for import from Canada, Mexico or Europe.
“No reasonable car executive can make such investments if the expected return can be wiped out after a pen,” said Dover.
The German Porsche said on Wednesday that it was assessing how the consumer could pass on the costs of possible rates, without putting pressure on margins, which implies a price increase.
“For now we hope that there are solutions that will lead to a wise rate regime between regions,” said Porsche CFO Jochen Breckner during a press conversation.
Various car manufacturers double plans to produce more cars in the US to escape the rates, but analysts said that car prices are likely to rise because suppliers of car parts whose supply chains are not as located as car companies will be injured.
Two large South Korean steel makers said they considered options, including possible investments in operations in the United States, because the metal rates came into force.
Canada’s Aldoma Steel paused the export of steel from Canada to the United States, and the CEO Michael Garcia called the rates ‘very worrying’.
‘Confusing, incomprehensible’
Speaking on the French television hours before the aluminum rates came into effect, Airbus CEO Guillaume Faury warned of trade protection while the world is descending in Tit-for-TAT measures.
“Some of my suppliers can be affected and we are starting to see some disturbance,” he said, adding to it, “we are in a trade war and when a trade war starts, it tends to maintain itself and feed itself.”
Until now, the space industry has not seen a significant direct impact, but many of its suppliers are in Mexico, Canada and China, who are the target of earlier tasks or tariff warnings.
JPMorgan’s chief economist Bruce Kasman said that this year he saw a 40% chance on an American recession, which would rise to 50% if Trump continued threats to set mutual rates from April. He also warned of permanent damage to the United States as an investment destination if the administration undermines confidence in governance.
Asked for a recession as a result of his trade policy, Trump said Tuesday: “I don’t see it at all.” On Monday he had refused to exclude one.
The income of the German sportswear maker Puma and Zara owner Inditex underlines ensure that uncertainties about trade begin to curb American expenses. Shares in Puma, which emphasized trade disputes as a challenge and announced job reductions, lost almost a quarter of their value.
France, Spain and Italy have all asked the European Commission to exclude wine and spirits from the list of American goods aimed at rates, a director of a great European spirit producer said Wednesday. EU rates on American spirits such as Bourbon Whiskey will be “devastating” for the drink industry, said trade associations on both sides of the Atlantic Ocean.
Shares of American beauty companies, including Estee Lauder, fell after a organ of a French cosmetics industry said that there was a “huge” risk of retribution by the US after the EU said it would impose rates on the US input, including Makeupup.
According to LSEG data, more than 900 of the 1500 largest American companies have mentioned the rates for profit calls or at investor events.
The rates are already sending prices for aluminum users in the United States to include highlights. At a conference organized by UBS in New York, Bud Light maker Anheuser-Busch Inbev said higher input costs due to rates will make beer tins more expensive.
Christian Kohlpaintner, CEO of German chemicals distributor Brenntag, said that the “confusing, incomprehensible” economic and political situation made it difficult to run a business.
“The big risk is that companies will stop expenses and also hold the consumers purchases,” says Justin Onuekwusi, Chief Investment Officer at investment firm St. James’s Place.
(Reporting by Tim Hepher in Paris, Karl Plume in Chicago; Additional reporting by Dhara Ranasinghe in London, Siddharth Cavale in New York, Kalea Hall in Detroit and Reuters agencies; Writing by Josephine Mason and Sayantani Ghosh; edited) edited;
