Trade tensions build as Daimler warns on sales

Mercedes-Benz maker Daimler shocked investors on Thursday with a warning that trade tensions were hitting sales, while fears of a “tit-for-tat” trade war grew as Europe readied retaliatory tariffs against the United States. Auto stocks sank to a nine-month low on European markets after Daimler cut its 2018 profit forecast and said it was considering “possible strategic options” in light of the rising trade tensions between China and the United States.

The revised forecast sparked fears of earnings downgrades across the industry and followed a proposal by US President Donald Trump to impose tariffs on imported vehicles, arguing that trade imbalances threatened US national security.

Trump is separately promising to impose tariffs on up to $200 billion of Chinese goods, escalating a conflict that has already drawn retaliatory steps from nearly all corners of the world. China for its part has warned it will retaliate with levies on US products, potentially including the Mercedes-Benz SUVs shipped to China from Alabama. Daimler's news comes a day after top central bank chiefs said a developing trade war between the world's biggest economies was weighing on business confidence and could force central banks to downgrade their outlook.

Meeting in Portugal, the heads of the US Federal Reserve, the European Central Bank, the Bank of Japan and the Reserve Bank of Australia on Wednesday all took a gloomy view on the conflict, arguing the consequences are already evident.

“Changes in trade policy could cause us to have to question the outlook,” Fed Chair Jerome Powell said in some of his strongest remarks yet on the issue.

Mario Draghi, head of the European Central Bank (ECB), said it was too early to assess the monetary policy impact of an escalation in trade tariffs between the United States and its partners but there was no reason for optimism.

China's commerce ministry on Thursday accused the United States of being “capricious” over bilateral trade issues, and warned that the interests of US workers and farmers ultimately will be hurt by Washington's penchant for brandishing “big sticks”.

“It is deeply regrettable that the US has been capricious, escalated the tensions, and provoked a trade war,” commerce ministry spokesman Gao Feng said. “The US is accustomed to holding 'big sticks' for negotiations, but this approach does not apply to China.”

The EU meanwhile prepared to impose 25 percent duties on 2.8 billion euros ($3.2 billion) of US imports from Friday, retaliatory measures that could escalate into a full trade war if Trump carries out his threat to penalize European cars.