Mercedes-Benz builds SUVs at its plant in Vance, Alabama, that are shipped to China. The tariffs on those are expected to rise, cutting sales.

The rising risk of a global trade war has prompted Daimler AG, the parent of Mercedes-Benz Cars, to reduce its earnings guidance for 2018.

Daimler said has “made a new assessment of the earnings” potential for the year 2018 and reduced its earnings guidance for the full year because of the uncertainty surrounding trade.

“From today’s perspective, the decisive factor is that, at Mercedes-Benz Cars, fewer than expected SUV sales and higher than expected costs – not completely passed on to the customers – must be assumed because of increased import tariffs for U.S. vehicles into the Chinese market,” Daimler said in its new guidance. 

The SUVs are assembled in a Mercedes-Benz plant in Vance, Alabama, and exported to China, which is preparing to impose steep tariffs on imported vehicles in response to the tariff’s imposed by the Trump administration on Chinese-made goods.

(“Nearly every segment of the auto industry” threatened by Trump trade war. Click Here for more.)

Daimler AG's Dieter Zetsche's earlier announced earnings predictions for 2018 are now being revised.

This effect cannot be fully compensated by the reallocation of vehicles to other markets, Daimler noted.

During the past quarter century, the global auto industry has come to rely on a free-trade system that allows companies to order components from the most efficient suppliers regardless of where they are made and has made it easier to sell finished vehicles across international borders.

(Click Here for the story about how you can own the original Mercedes — or at least a good copy.)

As another decisive factor, a negative effect on earnings is to be expected in the second half of the year in connection with the new certification process, Worldwide Harmonized Light Vehicles Test Procedure, which is being imposed by the European Union.

Even Daimler's truck division is expected to suffer in the current economic environment.

Daimler also disclosed it expects earnings at Mercedes-Benz Vans are feeling the impact of the recall of diesel vehicles. Additionally, earnings at Daimler Buses are negatively affected by the declining demand in Latin America, Daimler said.

(To see more about Mercedes tooling up a French plant to take on Tesla Model 3, Click Here.)

The company said earnings from Mercedes-Benz cars are now expected to drop this year will fall the level achieved in 2017, while the earnings of Mercedes-Benz vans will be significantly below the level of the previous years. The earnings from Daimler Bus Group will be “in the magnitude of the previous year. Overall, the Daimler Group’s earnings will be “slightly below” the previous year’s level.

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