Initial tariff impacts painful for auto, textile and chemical industries
While the global macroeconomic effects have remained moderate so far, sector-specific impacts have become increasingly clear as companies publish their second-quarter results. The automotive industry, an archetypically globalized sector, has been the first to falter: General Motors reported $1.1 billion in losses linked to tariffs in just the first half of the year, Stellantis (which encompasses Peugeot, Citroën, Chrysler, Fiat and others) reported €300 million, and Volkswagen €1.3 billion. "If the current tariffs [25%], the burden would increase to several billion" for the whole year, said Oliver Blume, CEO of Volkswagen.
The chemical industry has faced a similarly alarming situation: Five European companies have issued profit warnings, all stressing that US demand has decreased. The same is true for textiles: Puma has issued a profit warning, with its share price dropping more than 15% on Friday, July 25, while Nike announced that the tariffs had cost it $1 billion.
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Fashion Network
17 minutes ago
- Fashion Network
France lashes out as EU agrees to tariff pact with Washington
France has denounced the new trade agreement between the European Union and the United States as a 'submission,' even as most EU members acknowledged the deal was unequal but necessary to avoid an economically damaging trade war with Washington. The framework agreement, announced Sunday between two economies representing nearly a third of global trade, allows the U.S. to impose a 15% import tariff on most EU goods starting next month. The deal offers limited protection for key sectors, including the automotive and pharmaceutical industries. While the 15% rate is half of what Washington initially threatened, it still exceeds European expectations significantly. U.S. President Donald Trump, who has sought to reshape global trade using tariff leverage since returning to the White House earlier this year, praised the accord during a visit to Scotland, calling it 'the biggest deal ever made.' But France, the EU's second-largest economy, was outspoken in its disapproval. 'It is a dark day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission,' French Prime Minister Francois Bayrou wrote on X (formerly Twitter). French President Emmanuel Macron has made no public statement on the matter. While the mood across Europe was subdued, most governments agreed that failing to reach an agreement would have triggered a far worse scenario. 'This agreement has succeeded in averting a trade conflict that would have hit the export-oriented German economy hard,' said German Chancellor Friedrich Merz, whose country leads the EU bloc's economic rankings. EU Trade Commissioner Maros Sefcovic said during a press conference that allowing 30% tariffs to be imposed would have been 'much, much worse.' 'This is clearly the best deal we could get under very difficult circumstances,' he added. Some member states acknowledged the deal provides stability following months of trade tensions with the U.S. Sweden described it as the 'least bad alternative,' while Spain supported it 'without enthusiasm.' A final deal will likely require ratification from EU capitals. Still work to do Because trade policy falls under the European Commission's authority, French objections are unlikely to derail the framework agreement. However, the deal has not yet been finalised. Many of the agreement's specifics remain unknown. EU officials said they expect clarification in a joint statement to be released by August 1. Additional negotiations will follow to turn the agreement into a full-fledged deal. Germany also called for further negotiations, particularly regarding the steel sector. President Trump said the deal—alongside an investment package that exceeds the Japan agreement signed last week—would strengthen trans-Atlantic relations after years of what he described as unfair treatment of U.S. exporters. Japan's package will include up to $550 billion in equity, loans and guarantees from state-run agencies, to be invested at Trump's discretion, according to Tokyo. In contrast, EU officials stated that the EU's $600 billion investment figure is based on non-binding intentions from the private sector. The agreement is expected to bring regulatory clarity to European industries, including those in the automotive, aerospace, and chemical sectors. However, EU negotiators had originally pushed for a zero-for-zero tariff deal. A 15% tariff remains significantly higher than the U.S.'s average import tariff rate of 2.5% before Trump's return. More clarity, but a challenge European stocks opened higher on Monday, with the STOXX 600 reaching a four-month high. Tech and healthcare sectors led the gains. 'The 15% rate is better than the market was fearing,' said Jefferies economist Mohit Kumar. Still, many European businesses remain conflicted about the outcome. 'Those who expect a hurricane are grateful for a storm,' said Wolfgang Große Entrup, head of the German Chemical Industry Association (VCI). 'Further escalation has been avoided. Nevertheless, the price is high for both sides. European exports are losing competitiveness. U.S. customers are paying the tariffs.' A major concern remains how the EU's promise to invest hundreds of billions of dollars in the U.S. and sharply increase energy imports can be realized. It remains unclear whether specific investment pledges have been made, or if the details are still being finalized. While the EU has committed to $750 billion in strategic purchases over the next three years—including oil, liquefied natural gas (LNG), and nuclear fuel—the U.S. may struggle to meet the demand. Though U.S. LNG production capacity is expected to nearly double over the next four years, analysts say it still won't be enough to meet Europe's needs. Oil production forecasts have also been revised downward. Despite the uncertainties, analysts say the deal has reduced market instability. Oil prices edged up on Monday.
France 24
2 hours ago
- France 24
EU car industry sees relief - and pain - in US trade deal
German auto companies in particular were in for a great deal of export pain, as their share prices indicated. Shares in Porsche, Volkswagen, BMW and Mercedes-Benz all lost more than three percent in trading Monday. The agreement eases "the intense uncertainty surrounding transatlantic trade relations in recent months", Europe's main auto group, the European Automobile Manufacturers' Association (ACEA), said in a statement welcoming the deal "in principle". But it noted that the 15 percent US tariffs imposed on EU goods including cars "will continue to have a negative impact not just for industry in the EU but also in the US". German Chancellor Friedrich Merz said his country's economy -- the biggest in Europe -- would face "substantial damage" from the US tariffs agreed in the deal. But, he said, "we couldn't expect to achieve any more". The United States is a key market for European automakers, which last year sent nearly 750,000 of its cars to it, representing nearly a quarter of the sector's overall exports. While the 15 percent rate is less than the 27.5 percent tariff US President Donald Trump imposed in April, it is far higher than the 2.5 percent levy European car manufacturers faced before Trump's return to the White House. A German analyst, Stefan Bratzel, said it could be expected that US consumers would pay two-thirds of the price hike caused by the tariff, while car exporters would probably swallow the other third. For those companies, "we might have to see whether it is possible for cost-cutting somewhere else," he said. The 15 percent rate was similar to one reached in the deal the United States struck with Japan, another major car-exporting country. Will cost industry 'billions' For German carmakers, the United States represents around 13 percent of their exports. In the short term, a 15 percent tariff will cost them "billions each year", said Hildegard Mueller, head of the national automobile manufacturers' association VDA. The situation has forced all the automakers to lower their 2025 profit forecasts and to look for ways to alleviate the pressure. BMW boss Oliver Zipse suggested in June that Europe could get rid of its own tariffs on imported vehicles made in the United States. That could benefit his company, which last year exported 153,000 vehicles from the Americas, and imported into Europe 92,000 cars that were assembled in the United States. Similarly, Mercedes is looking for help from the national or EU level. "The deal reached between the EU and the US is a first, important step that needs to be followed by other measures," a company spokeswoman told AFP. "Politicians need to keep working to get rid of obstacles getting in the way of free trade. We are counting on the EU and US to continue their constructive dialogue in the future," she said. Volkswagen is also facing tariff hardship for vehicles it makes in Mexico for the US market, announcing that its first-quarter results had been shaved by around 1.3 billion euros ($1.5 billion) from a year earlier. Its Porsche and Audi cars are also exposed as they have no production factories in the United States. On Monday, Audi cut its revenue and profit targets for this year, though it said it expects them to rise next year. Volkswagen CEO Oliver Blume has suggested reaching a side deal with the United States that would take into account investments his company could make in that country. Volvo Cars, the Swedish carmaker owned by China's Geely Holding, has announced steep second-quarter losses because of tariffs. The European auto sector is now lobbying the European Commission to delay the timetable for making the European car market go all-electric, and to provide some sort of industry stimulus. With no help, European car factories, already facing uphill challenges, "will have to reduce production," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research.
Fashion Network
2 hours ago
- Fashion Network
France lashes out as EU agrees to tariff pact with Washington
France has denounced the new trade agreement between the European Union and the United States as a 'submission,' even as most EU members acknowledged the deal was unequal but necessary to avoid an economically damaging trade war with Washington. The framework agreement, announced Sunday between two economies representing nearly a third of global trade, allows the U.S. to impose a 15% import tariff on most EU goods starting next month. The deal offers limited protection for key sectors, including the automotive and pharmaceutical industries. While the 15% rate is half of what Washington initially threatened, it still exceeds European expectations significantly. U.S. President Donald Trump, who has sought to reshape global trade using tariff leverage since returning to the White House earlier this year, praised the accord during a visit to Scotland, calling it 'the biggest deal ever made.' But France, the EU's second-largest economy, was outspoken in its disapproval. 'It is a dark day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission,' French Prime Minister Francois Bayrou wrote on X (formerly Twitter). French President Emmanuel Macron has made no public statement on the matter. While the mood across Europe was subdued, most governments agreed that failing to reach an agreement would have triggered a far worse scenario. 'This agreement has succeeded in averting a trade conflict that would have hit the export-oriented German economy hard,' said German Chancellor Friedrich Merz, whose country leads the EU bloc's economic rankings. EU Trade Commissioner Maros Sefcovic said during a press conference that allowing 30% tariffs to be imposed would have been 'much, much worse.' 'This is clearly the best deal we could get under very difficult circumstances,' he added. Some member states acknowledged the deal provides stability following months of trade tensions with the U.S. Sweden described it as the 'least bad alternative,' while Spain supported it 'without enthusiasm.' A final deal will likely require ratification from EU capitals. Still work to do Because trade policy falls under the European Commission's authority, French objections are unlikely to derail the framework agreement. However, the deal has not yet been finalised. Many of the agreement's specifics remain unknown. EU officials said they expect clarification in a joint statement to be released by August 1. Additional negotiations will follow to turn the agreement into a full-fledged deal. Germany also called for further negotiations, particularly regarding the steel sector. President Trump said the deal—alongside an investment package that exceeds the Japan agreement signed last week—would strengthen trans-Atlantic relations after years of what he described as unfair treatment of U.S. exporters. Japan's package will include up to $550 billion in equity, loans and guarantees from state-run agencies, to be invested at Trump's discretion, according to Tokyo. In contrast, EU officials stated that the EU's $600 billion investment figure is based on non-binding intentions from the private sector. The agreement is expected to bring regulatory clarity to European industries, including those in the automotive, aerospace, and chemical sectors. However, EU negotiators had originally pushed for a zero-for-zero tariff deal. A 15% tariff remains significantly higher than the U.S.'s average import tariff rate of 2.5% before Trump's return. More clarity, but a challenge European stocks opened higher on Monday, with the STOXX 600 reaching a four-month high. Tech and healthcare sectors led the gains. 'The 15% rate is better than the market was fearing,' said Jefferies economist Mohit Kumar. Still, many European businesses remain conflicted about the outcome. 'Those who expect a hurricane are grateful for a storm,' said Wolfgang Große Entrup, head of the German Chemical Industry Association (VCI). 'Further escalation has been avoided. Nevertheless, the price is high for both sides. European exports are losing competitiveness. U.S. customers are paying the tariffs.' A major concern remains how the EU's promise to invest hundreds of billions of dollars in the U.S. and sharply increase energy imports can be realized. It remains unclear whether specific investment pledges have been made, or if the details are still being finalized. While the EU has committed to $750 billion in strategic purchases over the next three years—including oil, liquefied natural gas (LNG), and nuclear fuel—the U.S. may struggle to meet the demand. Though U.S. LNG production capacity is expected to nearly double over the next four years, analysts say it still won't be enough to meet Europe's needs. Oil production forecasts have also been revised downward. Despite the uncertainties, analysts say the deal has reduced market instability. Oil prices edged up on Monday.
