The Strategist

European industrial companies start to suffer consequences of new tariffs

08/06/2018 - 12:44

European companies producing industrial goods began to feel negative consequences because of the US trade conflict with China and other countries, reports Reuters.

This can be explained by the fact that the new tariffs push up costs of spare parts and raw materials, as well as lead to new supply disruptions.

Manufacturers of equipment that use thousands of parts from around the world - from the Swedish tool manufacturer Husqvarna to the manufacturer of the Siemens wind turbines - have already felt a negative impact on the supply chain.

Automakers who may be directly affected by the new import tariffs for cars made in the US for export to China have already raised the alarm, announcing an increase in prices.

However, analysts believe that 65% to 80% of 34% of affected products that are exported from the US to China are not sold directly to consumers, but rather are key components used in other products.

"Although some of the direct financial risks are rather limited, we believe that the indirect effects may be more significant," Morgan Stanley Capital Ventures analysts wrote in a note published last week.

"To date, most companies have not provided details about risks associated with these tariffs, whether in terms of their supply chain or direct impact, and we are considering this situation that is hanging over our sector at the moment," the analysts said.

Investors in European companies engaged in the production of material goods, which have already benefited from global economic growth, in fact have not yet flinched.

After the US announced the tariffs for steel and aluminum on March 8, investors left industrial funds in March and April. But they made a u-turn and returned in May, according to Thomson Reuters Lipper.