FRANKFURT: German carmaker BMW said on Friday it expected tariffs to cost it 1 billion euros this year, while European officials warned the U.S. economy would be the biggest loser if President Donald Trump pursues an “idiotic” trade war.
BMW is directly in the firing line of the escalating trade spat between Washington and the European Union.
U.S. President Trump has increased tariffs on U.S. steel and aluminium imports and imposed a 25% duty on some vehicles from Mexico, including BMW’s, and threatened more tariffs on the EU, which he has called “hostile and abusive”. The EU has vowed to retaliate while calling for dialogue.
French Finance Minister Eric Lombard said on Friday a trade war between the EU and its U.S. ally would be “idiotic” but that the 27-country bloc would respond in kind to further tariffs.
BMW Chief Executive Oliver Zipse meanwhile said the company expected a 1 billion euro ($1.09 billion) hit to its 2025 earnings from the newly imposed U.S. tariffs and EU duties on its China-made electric vehicles.
He described the firm’s estimate of the impact as “conservative” but said executives did not expect all the tariffs imposed so far to remain in place for the whole year.
BMW, one of Europe’s biggest carmakers, reported a 37% drop in profits for last year.
VW may avoid 25% Trump tariff, but BMW and others face trade levy
The EU’s trade chief Maros Sefcovic is due to speak with U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer on the spiralling tariff conflict in a call scheduled for 1030 ET (1530 GMT) on Friday.
Though still not yet in full swing, the trade measures and countermeasures are already affecting economic growth because nervous firms and consumers are holding back spending or delaying investment.
“Uncertainty has gone way up,” said Bill Campbell, portfolio manager at investment management firm DoubleLine Capital.
“People are going to hold back on hiring, on investing until you can get some more clarity on … how many tariffs are going to be implemented.”
Stocks have tumbled on the war of words, with the S&P 500 now more than 10% below its February 19 peak - a far worse performance than for European indexes, many of which are still in positive territory for the year.
In a possible sign the uncertainty is already taking toll, Britain’s economy contracted unexpectedly in January, extending a run of stop-start data that has beset the Labour government’s attempts to spark growth.
Late on Thursday, German central bank chief Joachim Nagel described Trump’s policies as “a horror show” that could tip Germany into recession, while he and his French counterpart warned the trade war would rebound on the U.S. economy.
“It’s a shock for the world economy, but even more so for the American economy. It’s firstly a tragedy for the American economy,” French central bank governor Francois Villeroy de Galhau said.
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