Some European companies question US expansion amid tariff chaos
In each of the last three years, the EU exported more than €500 billion of goods to the US, mostly pharmaceuticals, vehicles and machinery. (EPA Images pic)
MILAN : US President Donald Trump's erratic approach to tariffs is causing some smaller European companies to question the benefits of expanding in the US market – a sign of how tough it has become to navigate trade in the world's top economy.
By putting levies on everything from steel and cognac to cars and sandals, Trump aims to prompt foreign firms to move investment to the US, building new factories and creating thousands of American jobs.
While major corporates from the auto and pharma sectors have rushed to announce expansions or say they are considering them, the stream of announcements, roll-backs and exemptions has left some smaller firms warier of committing.
Italy's EuroGroup Laminations currently pays no tariffs on the rotors and stators it supplies to US automotive customers, including Ford and GM, from its plant in Mexico as they comply with existing import rules.
'However, even if it had to, moving production to the US would expose it to tariffs in place on the special type of steel the company uses in its automotive parts,' CEO Marco Arduini told Reuters.
'Skipping potential US tariffs … would not necessarily mean it can compensate for extra costs and low availability of steel,' he said, adding that US labour costs, which are up to six times higher than in Mexico, were also an issue.
German fan and motor maker ebm-papst has put on hold plans to build a third US factory or expand one of its existing US sites due to current developments, including the risk that the tariffs will trigger a US recession.
'If there is an economic downturn in the US, demand may develop differently as a result,' CEO Klaus Geissdoerfer said.
Small and medium-sized enterprises (SMEs) are the backbone of many economies, including Italy and Germany, both EU members and major exporters to the US.
Because they have smaller financial buffers than blue-chip peers, they may react to fresh trade risks more quickly than bigger companies.
'Contrary to Donald Trump's hopes, his protectionism will not lead to more German companies moving to the US and creating jobs there,' said Marc Tenbieg, head of the DMB association that represents Germany's SMEs.
DMB in separate comments said a handful of SMEs, which declined to be named due to the sensitivity of the matter, are also currently reviewing their US businesses as a result of Trump's policies.
Some member firms of German engineering association VDMA are delaying purchases, Andrew Adair, the group's trade policy advisor for North America, said following a trip to the US earlier this month.
'Industry appears to be pressing the pause button at the moment,' he said.
After weeks of threats, Trump announced on April 2 a series of broad tariffs on goods imported to the US from most other countries.
They included a 20% tariff on EU imports that was later lowered to 10% under what he called a 90-day pause following a rout in US assets.
Trump's declarations that other countries have been 'screwing' the US for years – reflecting his ire at US trade deficits, including one of US$235.6 billion with the 27-nation EU – have also raised the political and diplomatic temperature.
Germany's LAPP, which makes everything from cables and wires to robotics for factories, is nevertheless sticking with plans to double production capacity at its New Jersey site in 2025.
'As a family business, we plan for the long term, not for election periods,' CEO Matthias Lapp said.
One major uncertainty is what tariffs will do to demand and inflation within the US.
RBC Capital reckons that 10% of US consumption is based on imports and that it will therefore be 'relatively difficult for consumers to substitute away from imported goods'.
However, consultancy AlixPartners reckons average US household discretionary spending will fall by more than 10% to US$27,000 in a post-tariff world, and recommends that companies adopt a 'pause & monitor' approach.
In each of the last three years, the EU on average exported more than €500 billion of goods to the US, mostly pharmaceuticals, vehicles and machinery, Eurostat data shows.
Trump has taken aim primarily at the bloc's makers of steel, autos and car parts.
While the US remains the EU's biggest trading partner, the tariffs have triggered some political pushback against taking on greater exposure, with French President Emmanuel Macron asking European firms to suspend planned investment for now.
Industry groups are urging European companies to focus instead on other foreign markets such as India, Latin America and Southeast Asia.
'We have seen that the situation can change quickly overnight,' said Sebastian Zank, head of corporates ratings production at credit ratings agency Scope.
'Everyone will keep their feet still until a picture emerges that can be described as sustainable,' Zank said.
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Malay Mail
3 hours ago
- Malay Mail
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Malay Mail
4 hours ago
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Araghchi's remarks came a day after US President Donald Trump said Iran 'cannot have a nuclear weapon', while expressing hope of striking a deal soon. On Thursday, Araghchi hit out at what he called 'media speculation' that the two sides were close to an agreement, saying he was 'not sure if' a deal is 'imminent'. Iran has held five rounds of talks with the United States in search of a new agreement to replace the deal with major powers that Trump abandoned during his first term in 2018. No date or venue has yet been announced for the next round but Araghchi said Wednesday he expected an announcement from mediator Oman in the 'next few days'. The two governments are at odds over Iran's uranium enrichment programme, which Washington has said must cease, but which Tehran insists is its right under the nuclear Non-Proliferation Treaty. 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Iran has since built up the largest stockpile of highly enriched uranium of any state without a nuclear arsenal. The uranium is enriched to 60 percent, still short of the 90 percent threshold needed for a nuclear warhead but far beyond the 3.67 percent limit set by the 2015 agreement. In recent days, Tehran has said that if a deal is reached, it may consider allowing US inspectors to join the teams from the UN nuclear watchdog monitoring compliance with its terms. Nuclear chief Mohammad Eslami said Iran 'will reconsider accepting American inspectors through the (International Atomic Energy) Agency' if 'an agreement is reached and Iran's demands are taken into account'. — AFP Western governments have long suspected Iran of seeking to develop a nuclear weapons capability to counter the widely suspected but undeclared arsenal of its arch-foe, Israel. 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Iran continued to honour the agreement for a year, but then began rolling back its own compliance with its terms. Iran has since built up the largest stockpile of highly enriched uranium of any state without a nuclear arsenal. The uranium is enriched to 60 percent, still short of the 90 percent threshold needed for a nuclear warhead but far beyond the 3.67 percent limit set by the 2015 agreement. In recent days, Tehran has said that if a deal is reached, it may consider allowing US inspectors to join the teams from the UN nuclear watchdog monitoring compliance with its terms. Nuclear chief Mohammad Eslami said Iran 'will reconsider accepting American inspectors through the (International Atomic Energy) Agency' if 'an agreement is reached and Iran's demands are taken into account'. — AFP
The Star
4 hours ago
- The Star
Trump gets key wins at Supreme Court on immigration, despite some misgivings
(Reuters) -The U.S. Supreme Court swept away this week another obstacle to one of President Donald Trump's most aggressively pursued policies - mass deportation - again showing its willingness to back his hardline approach to immigration. The justices, though, have signaled some reservations with how he is carrying it out. Since Trump returned to the White House in January, the court already has been called upon to intervene on an emergency basis in seven legal fights over his crackdown on immigration. It most recently let Trump's administration end temporary legal status provided to hundreds of thousands of migrants for humanitarian reasons by his Democratic predecessor Joe Biden while legal challenges in two cases play out in lower courts. The Supreme Court on Friday lifted a judge's order that had halted the revocation of immigration "parole" for more than 500,000 Venezuelan, Cuban, Haitian and Nicaraguan migrants. On May 19, it lifted another judge's order preventing the termination of "temporary protected status" for more than 300,000 Venezuelan migrants. In some other cases, however, the justices have ruled that the administration must treat migrants fairly, as required under the U.S. Constitution's guarantee of due process. "This president has been more aggressive than any in modern U.S. history to quickly remove non-citizens from the country," said Kevin Johnson, an immigration and public interest law expert at the University of California, Davis. No president in modern history "has been as willing to deport non-citizens without due process," Johnson added. That dynamic has forced the Supreme Court to police the contours of the administration's actions, if less so the legality of Trump's underlying policies. The court's 6-3 conservative majority includes three justices appointed by Trump during his first term as president. "President Trump is acting within his lawful authority to deport illegal aliens and protect the American people. While the Supreme Court has rightfully acknowledged the president's authority in some cases, in others they have invented new due process rights for illegal aliens that will make America less safe. We are confident in the legality of our actions and will continue fighting to keep President Trump's promises," White House spokesperson Abigail Jackson told Reuters. The justices twice - on April 7 and on May 16 - have placed limits on the administration's attempt to implement Trump's invocation of a 1798 law called the Alien Enemies Act, which historically has been employed only in wartime, to swiftly deport Venezuelan migrants who it has accused of being members of the Tren de Aragua gang. Lawyers and family members of some of the migrants have disputed the gang membership allegation. On May 16, the justices also said a bid by the administration to deport migrants from a detention center in Texas failed basic constitutional requirements. Giving migrants "notice roughly 24 hours before removal, devoid of information about how to exercise due process rights to contest that removal, surely does not pass muster," the court stated. Due process generally requires the government to provide notice and an opportunity for a hearing before taking certain adverse actions. The court has not outright barred the administration from pursuing these deportations under the Alien Enemies Act, as the justices have yet to decide the legality of using the law for this purpose. The U.S. government last invoked the Alien Enemies Act during World War Two to intern and deport people of Japanese, German and Italian descent. "The Supreme Court has in several cases reaffirmed some basic principles of constitutional law (including that) the due process clause applies to all people on U.S. soil," said Elora Mukherjee, director of Columbia Law School's immigrants' rights clinic. Even for alleged gang members, Mukherjee said, the court "has been extremely clear that they are entitled to notice before they can be summarily deported from the United States." A WRONGLY DEPORTED MAN In a separate case, the court on April 10 ordered the administration to facilitate the release from custody in El Salvador of Kilmar Abrego Garcia, a Salvadoran migrant who was living in Maryland. The administration has acknowledged that Abrego Garcia was wrongly deported to El Salvador. The administration has yet to return Abrego Garcia to the United States, which according to some critics amounts to defiance of the Supreme Court. The administration deported on March 15 more than 200 people to El Salvador, where they were detained in the country's massive anti-terrorism prison under a deal in which the United States is paying President Nayib Bukele's government $6 million. Ilya Somin, a constitutional law professor at George Mason University, said the Supreme Court overall has tried to curb the administration's "more extreme and most blatantly illegal policies" without abandoning its traditional deference to presidential authority on immigration issues. "I think they have made a solid effort to strike a balance," said Somin, referring to the Alien Enemies Act and Abrego Garcia cases. "But I still think there is excessive deference, and a tolerance for things that would not be permitted outside the immigration field." That deference was on display over the past two weeks with the court's decisions letting Trump terminate the grants of temporary protected status and humanitarian parole previously given to migrants. Such consequential orders were issued without the court offering any reasoning, Mukherjee noted. "Collectively, those two decisions strip immigration status and legal protections in the United States from more than 800,000 people. And the decisions are devastating for the lives of those who are affected," Mukherjee said. "Those individuals could be subject to deportations, family separation, losing their jobs, and if they're deported, possibly even losing their lives." TRAVEL BAN RULING Trump also pursued restrictive immigration policies in his first term as president, from 2017-2021. The Supreme Court gave Trump a major victory in 2018, upholding his travel ban targeting people from several Muslim-majority countries. In 2020, the court blocked Trump's bid to end a program that protects from deportation hundreds of thousands of migrants - often called "Dreamers" - who entered the United States illegally as children. Other major immigration-related cases are currently pending before the justices, including Trump's effort to broadly enforce his January executive order to restrict birthright citizenship - a directive at odds with the longstanding interpretation of the Constitution as conferring citizenship on virtually every baby born on U.S. soil. The court heard arguments in that case on May 15 and has not yet rendered a decision. Another case concerns the administration's efforts to increase the practice of deporting migrants to countries other than their own, including to places such as war-torn South Sudan. Boston-based U.S. District Judge Brian Murphy required that migrants destined for so-called "third countries" be notified and given a meaningful chance to seek legal relief by showing the harms they may face by being send there. Murphy on May 21 ruled that the administration had violated his court order by attempting to deport migrants to South Sudan. They are now being held at a military base in Djibouti. The administration on May 27 asked the justices to lift Murphy's order because it said the third-country process is needed to remove migrants who commit crimes because their countries of origin are often unwilling to take them back. Johnson predicted that the Supreme Court will side with the migrants in this dispute. "I think that the court will enforce the due process rights of a non-citizen before removal to a third country," Johnson said. (Reporting by Andrew Chung in New York; Additional reporting by John Kruzel; Editing by Will Dunham)
