Here’s What European Companies Are Saying About the Trade War

(Bloomberg) -- President Donald Trump's tariffs announcement Thursday confirmed the fears of lots of European companies, which, according to earnings reports released this week, are increasingly resigned to global trading conditions getting worse before they get better.

Almost every European equities sector dropped on Friday in reaction to Trump's plan for a 10% tariff on a further $300 billion of Chinese imports, with China warning it will take “necessary counter-measures.”

“The announcement will only serve to create additional downward pressure on business confidence,” UBS Global Wealth Management Chief Investment Officer Mark Haefele said in a note. Trump seems willing to “up the ante even further” through even higher tariff rates if negotiations remain stalled, Haefele said.

Judging by this week's trading statements, many firms already knew they were caught in the crossfire. Here's what they've had to say over the past five days:

Apparel

German sportswear-maker Puma SE is one of a number of companies across a variety of industries to move manufacturing from China to other Asian hubs, in order to side-step the trade war. The brand has moved some production to Vietnam, Bangladesh and Cambodia and is also carrying about 7% more inventory than it normally would. Unsurprisingly, Asian manufacturing capacity outside of China is at a premium, but “you can't move all production out of China,” Chief Executive Officer Bjorn Gulden said.

Electronics

While Puma and its rivals pre-empt tariffs, electronics companies have already been hit, and they're taking action. British cable producer Volex Plc has shifted some production to Vietnam and Indonesia, while NCAB Group AB says it's partnered with a Taiwanese manufacturer to supply the U.S. market. The Swedish circuit board maker blamed a 20% decline in second-quarter sales on customers waiting for tariffs to return to 10%, from the 25% rate introduced in May.

Those clients could be waiting a while if Spectris Plc's judgment is correct: the measuring instrument company says it is “working on the assumption that the current planned tariffs continue for the foreseeable future,” while predicting that the trade war will cut adjusted operating profit by 4 million pounds ($4.8 million) to 8 million pounds. Meanwhile, Renishaw Plc, the U.K. engineer that's long been speculated as an Apple Inc. supplier, said U.S.-China tensions were among the reasons for a 6.1% year-on-year fall in revenue. It expects market conditions to remain difficult going into 2020.

Industrials

Tariffs on imported zirconium haven't grabbed too many headlines, but for Elementis Plc they're the cause of a 20% fall in profit for the London-based chemical maker's personal-care division. China was the world's third-biggest producer of zirconium, an ingredient in antiperspirants, in 2018. Elementis believes its new manufacturing site in India, purchased in December 2018, will reduce the impact of tariffs.

Embattled polymer-maker Low & Bonar Plc says it had an “extremely challenging” first half as the trade saga led to a reduction in demand from Chinese customers. U.K. miner Anglesey Mining Plc is less worried, saying uncertainty caused by “fears of trade wars and tariffs” is being outweighed by broader positive sentiment in base metals.

Finance

London Stock Exchange Group Plc, fresh from confirming its $27 billion deal to buy Refinitiv, warned that trade tensions continue to unsettle markets, adding that, if the global economy underperforms, weaker trading activity may lead to lower revenue. Irish insurance company FBD Holdings Plc was more optimistic, saying risk assets had delivered positive returns in the first half, partly as a result of “geopolitical stabilization, particularly between the U.S. and China.”

Next Week...

We'll have an eye on Asia-focused bank HSBC Holdings Plc, as well as auto industry names like Continental AG and Porsche Automobil Holding SE, with that sector having been one of those hurt most by the trade war. Also look out for Adidas AG, which, along with rivals Puma and Nike Inc., told Trump in May that his tariffs were “catastrophic.”

--With assistance from Joe Easton.

To contact the reporter on this story: Ivan Edwards in London at iedwards16@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis, John Viljoen

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