By Danilo Masoni
When Donald Trump moved ahead with steel and aluminiumimport tariffs, the European Union threatened duties on
The
But European industrial stocks overall are now closeto where they were before Trump's tariff announcement,suggesting the risk premium on the sector has barely budged.
Analysts attribute this surprising resilience to a raft ofearnings upgrades earlier this year, which suggested there isenough underlying demand for companies to push through priceincreases to offset higher port duties.
The impact of the Trump tariffs on manufacturers' basicmaterial costs could also be muted: UBS analysts see higherindustrial metal prices in
"The tariffs could have a large impact on some singleexporters that are very localised, but for the European growthoutlook they don't lead to any big change to forecasts," saidSandrine Perret, investment strategist at Credit SuisseInternational Wealth Management. "If you were to haveretaliation the risk would be of an escalation. But we aren'tthere yet."
If the Trump duties take effect, the European Commission hassaid it will impose "safeguards" to stop steel or aluminiumbeing diverted to
Whether the tit-for-tat measures will escalate further isless clear, but Perret said she was not changing her forecastfor the euro zone economy to grow 2.6 percent this year.
MAKE DRIVERS PAY?
Steel accounts for just 1.4 percent of euro zone exports.Cars are more important -- European automakers send around
Trump threatened on March 3 to raise tariffs on imports ofEuropean cars, now at 2.5 percent compared to the 10 percentlevied on
This "would be most meaningful for BMW followed by VW andDaimler," JPMorgan analysts said. "Least exposed would be FCA(Fiat Chrysler) which sources the bulk of cars sold in the
However, JPM said German carmakers should still be able topass on at least half of the extra import duty to consumers inhigher forecourt prices.
Tariffs could make producing a car in
But he is sticking with a "neutral" weighting on Europeancarmakers.
"I haven't changed my exposure to European autos," he said,citing a number of potential M&A deals including a possiblespin-off at Fiat Chrysler.
Since Trump's comments on car import tariffs, BMW shareshave risen 1.5 percent, Daimler 1 percent and Fiat 7 percent.
Some effects on industrial supply chains from the tariffmoves are yet to appear, but the global nature of many Europeanmanufacturing businesses could actually result in net benefits.
The tariffs could help Italian pipe maker Tenaris,which has two big plants in
"In the short term the impact is likely to be quite limited... although it's difficult to make an exact prediction as we'restill at an early stage," said Pedroni.
Morgan Stanley said companies such as British metal flowengineer Vesuvius or European cable makers Prysmianand Nexans that sell premium products may beable to pass on to clients the higher raw material costs butappliance maker Electrolux or elevator firm Konecould struggle.
Societe Generale has put French tube maker Vallourecand Swedish steel maker SSAB in a "Long
(Graphics by Thyagaraju Adinarayanediting by Tom Pfeiffer andDavid Evans)