Some European companies wary of expanding in US amid tariff chaos
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 United States, 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.
But 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 European Union members and major exporters to the United States.
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 United States 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 United States 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 $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 United States.
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'.
But consultancy AlixPartners reckons average US household discretionary spending will fall by more than 10% to $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 euros 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.'
Agencies
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Gulf Today
3 hours ago
- Gulf Today
US proposes 60-day ceasefire for Gaza, hostage-prisoner swap
A US plan for Gaza seen by Reuters on Friday proposes a 60-day ceasefire and the release of 28 Israeli hostages alive and dead in the first week, in exchange for the release of 1,236 Palestinian prisoners and the remains of 180 dead Palestinians. The document, which says the plan is guaranteed by US President Donald Trump and mediators Egypt and Qatar, includes sending humanitarian aid to Gaza as soon as Hamas signs off on the ceasefire agreement. The aid will be delivered by the United Nations, the Red Crescent and other agreed channels. On Thursday, the White House said Israel had agreed to the US ceasefire proposal. Israeli media said Prime Minister Benjamin Netanyahu told the families of hostages held in Gaza that Israel had accepted the deal presented by President Trump's Middle East envoy Steve Witkoff. The Palestinian group Hamas told Reuters it was reviewing the plan and would respond on Friday or Saturday. The US plan provides for Hamas to release the last 30 of the 58 remaining Israeli hostages once a permanent ceasefire is in place. Israel will also cease all military operations in Gaza as soon as the truce takes effect, it shows. The Israeli army will also redeploy its troops in stages. Deep differences Deep differences between Hamas and Israel have stymied previous attempts to restore a ceasefire that broke down in March. Israel has insisted that Hamas disarm completely, be dismantled as a military and governing force and return all 58 hostages still held in Gaza before it will agree to end the war. Hamas has rejected the demand to give up its weapons and says Israel must pull its troops out of Gaza and commit to ending the war. Israel launched its campaign in Gaza in response to the Hamas attack in its south on October 7, 2023, that killed some 1,200 people and saw 251 Israelis taken hostage into Gaza, according to Israeli tallies. The subsequent Israeli military campaign has killed more than 54,000 Palestinians, Gaza health officials say, and left the enclave in ruins. Mounting pressure Israel has come under increasing international pressure, with many European countries usually reluctant to criticise it openly demanding an end to the war and a major relief effort. Witkoff told reporters on Wednesday that Washington was close to "sending out a new term sheet" about a ceasefire by the two sides in the conflict. "I have some very good feelings about getting to a long-term resolution, temporary ceasefire and a long-term resolution, a peaceful resolution, of that conflict," Witkoff said at the time. The 60-day ceasefire, according to the plan, may be extended if negotiations for a permanent ceasefire are not concluded within the set period. Senior Hamas official Sami Abu Zuhri said on Thursday the terms of the proposal echoed Israel's position and did not contain commitments to end the war, withdraw Israeli troops or admit aid as Hamas has demanded. The Gaza Humanitarian Foundation, a private group backed by the United States and endorsed by Israel, expanded its aid distribution to a third site in Gaza on Thursday. Heavily criticised by the United Nations and other aid groups as inadequate and flawed, the group began its operation this week in Gaza, where the UN has said 2 million people are at risk of famine after Israel's 11-week blockade on aid entering the enclave. The launch was marred by tumultuous scenes on Tuesday as thousands of Palestinians rushed to distribution points and forced private security contractors to retreat. The chaotic start to the operation has raised international pressure on Israel to get more food in and halt the fighting in Gaza. GHF has so far supplied about 1.8 million meals and plans to open more sites in coming weeks. Reuters
Gulf Today
3 hours ago
- Gulf Today
Trump sends Musk out of White House with gold key
After spending 130 days working to dismantle entire federal government agencies, firing tens of thousands of civil servants and sparking dozens of lawsuits over potential misuse of Americans' personal data, the world's wealthiest man was rewarded with a gold-plated skeleton key that can be purchased for nearly $8,000 on eBay. Seated at the iconic desk hewed from timbers harvested from H.M.S. Resolute, President Donald Trump praised Elon Musk for his four months of work leading the "Department of Government Efficiency," a role from which Musk is required to depart due to his now-former status as a Special Government Employee, which had let him work for free without complying with any financial disclosure rules but only for 130 days per year. He called the Tesla and SpaceX CEO "one of the greatest business leaders and innovators the world has ever produced" and hailed him for having led what Trump called "the most sweeping and consequential government reform program in generations." "Elon gave an incredible service. There's nobody like him, and he had to go through the slings and the arrows, which is a shame, because he's an incredible patriot. The good news is that 90% of the country knows that, and they appreciate it, and they really appreciate what he did," he said. Trump then presented Musk with a trinket that dated back to the 47th president's prior term as the 45th President of the United States: A "Key to the White House." It was an oversize, gold-plated key in a wooden presentation box, with an engraving of the Executive Mansion on the inside of the lid. Musk was not by any means the first person to be gifted with this Trumpian trinket. In his 2022 memoir Breaking History, Trump's son-in-law and ex-senior adviser Jared Kushner recounted how he'd "whipped out" the same gift for Israeli Prime Minister Benjamin Netanyahu during a September 2020 meeting in the Oval Office. At the time, Trump called it a "a special token of affection, given by myself and the First Lady to the Prime Minister and the First Lady of Israel." "And it's a key — we call it a key to the White House. And it's a key to our country and to our hearts," he said as he handed it over to Netanyahu. Kushner wrote that Trump had told Netanyahu that the key he gifted him was "the first key I'm giving to anyone" and claimed that it would grant the Israeli leader entry to the White House "even when I'm not president anymore." As he handed Musk the same tchotchke nearly five years later, Trump said it was "a little special something" that he gives to "very special people" as "a presentation from our country." It's not known how many of the souvenirs have been given out by Trump, but a search by The Independent revealed that identical items have been listed on eBay, with two current listings showing prices of $7,250 and &7,950. The auction site RR Auction also shows another of them having sold for $3,670. Musk, who wore a black "Make America Great Again" cap, a black suit and a t-shirt with the words "The Dogefather" on it and appeared to look around the Oval Office aimlessly as Trump spoke, accepted the box from the president as he told reporters that his time in the administration "necessarily had to end" and had been "a limited time." But somewhat paradoxically, he said the DOGE team he put in place "will only grow stronger over time" and compared DOGE to "sort of Buddhism." "It's like a way of life. So it is permeating throughout the government, and I'm confident that over time, we will see a trillion dollars of savings and reduction in a trillion dollars of waste," he said. He added that he will "continue to be visiting" Washington "as a friend and adviser" to Trump and stressed that he looked forward to being back in the Oval Office as he praised the president for his redecorating efforts, which have seen the iconic space take on a distinctively gilded look through copious amounts of gold leaf on the walls and ceiling. Musk also sported a noticeable black eye during the press conference, and when a reporter asked him what had happened to him, he blamed his young son, X Æ A-12, who goes by "Little X." "I was horsing around with Little X, and I said 'go ahead, punch me in the face. And he did," he said. But the centibillionaire's face wasn't the only one that was discussed during the hour-long session. After he and Musk spoke, Trump took questions on multiple topics, including one about a recent incident involving French president Emmanuel Macron and his wife, Brigitte, during which the French First Lady appeared to strike her husband as they were exiting an aircraft earlier this week. Asked whether he had any advice for his French counterpart, Trump — who has been married three times and divorced twice — replied: "Make sure the door remains closed." He added that he'd spoken with Macron recently and said the French first couple was "fine." "They're two really good people. I know him very well, and I don't know what that was all about, but I know him very well, and they're fine," he said. Andrew Feinberg, The Independent
The National
3 hours ago
- The National
Opec+ agrees another accelerated oil output for July
Opec+ has agreed to maintain its monthly oil output of 411,000 barrels per day for July, as it boosts supply amid trade tension-induced economic uncertainty. Analysts say the move is a possible gesture to appease US President Donald Trump's desire for lower crude prices. The hike marks the third consecutive month that the group, led by Saudi Arabia and Russia, will raise production at the same level, Opec+ said in a statement following a virtual meeting on Saturday. The decision was "in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories", the group said. Opec+ noted that gradual increases may be paused or reversed "subject to evolving market conditions", giving them the "flexibility will allow the group to continue to support oil market stability". The accelerated unwinding of Opec+'s own restriction programme is expected to boost the market's supply surplus into the second half of 2025 "when demand prospects are fragilised by trade tensions", Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, told The National. Mr Trump, meanwhile, has repeatedly called for lower oil prices to boost the domestic US oil industry. "We don't yet know if Opec+'s latest moves are to please Mr Trump or to [align] certain members" with the group's quotas, Ms Ozkardeskaya said. "Yet the rising supply will likely continue to apply negative pressure on prices – unless there is a sudden shift in the tariff picture like ruling of the tariffs." Oil prices started 2025 strongly. The closing price of Brent, the benchmark for two thirds of the world's oil, peaked at more than $82 a barrel on January 15, while West Texas Intermediate, the gauge that tracks US crude, hit almost $79 per barrel also on that day. However, crude prices have since waffled and have been particularly jolted by Mr Trump's sweeping global tariffs that he announced on April 2, which have disrupted stock markets and reignited fears of a global recession, especially as US trade partners – most notably China – unleashed retaliatory levies. Since then, Brent and WTI have slipped more than 16 per cent and 15 per cent, respectively, and the uncertainty surrounding Mr Trump's flip-flopping over his tariff policies have put pressure on oil prices. In March, Opec+ said it would proceed with a 'gradual and flexible' unwinding of voluntary production cuts of 2.2 million bpd starting in April, adding 138,000 bpd per month until September 2026. The planned return of production cuts – originally made by eight Opec+ members, including Saudi Arabia, Russia, the UAE and Iraq, in November 2023 – had been pushed back several times amid concerns about growing supply in the market. In March, the alliance released a new schedule for seven member nations to make further oil output cuts to compensate for exceeding their quotas. The plan includes monthly cuts ranging from 189,000 bpd to 435,000 bpd, with the reductions scheduled to last until June 2026. Opec has been losing global market share in recent years. In 2024, their output was less than 27 million bpd, down from 30 million bpd a decade ago and after having peaked of 34 million bpd in 2016. "In addition to trying to enforce stronger discipline within the group, Opec sees [increasing output] as a good opportunity to place pressure on higher cost oil producers, including US shale, and win back some market share," analysts at Jadwa Investment said. "This policy has the added benefit of bolstering good relations with the US given President Trump's stated desire for lower oil prices to bring down inflation in the US and force a diplomatic solution to the Russia-Ukraine war." How Opec+ policy evolves during 2025 will largely depend on internal compliance issues and the broader developments in the oil market, with hikes seen to scale down should global crude inventories start to build up, they added. The UAE's Minister of Energy and Infrastructure, Suhail Al Mazrouei, this week said Opec+ should be 'mindful' about oil demand, and that the group is 'doing their best' to balance the market and ensure there is enough investment into the supply. Mr Al Mazrouei's comments are "constructive", said Giovanni Staunovo, a strategist at Swiss bank UBS. "Opec+ crude exports are stable versus April, suggesting higher compliance and domestic demand keeps exports in check," the told The National. At its ministerial meeting on Wednesday, Opec reiterated its "continued commitment ... to achieve and sustain a stable oil market".
