German automaker Daimler AG warned the trade dispute between the U.S. and China will hit its earnings, predicting fewer Chinese consumers will buy its luxury cars because of retaliatory tariffs for U.S.-made vehicles imported into China.
Daimler is the first large business to warn of a profit impact from escalating trade tensions between the two economic powers, according to Bloomberg News. Daimler produces SUVs in Alabama and ships them to China, which imposed tariffs on cars imported from the U.S. in response to President Donald Trump's .
The company said late Wednesday that it now sees fewer SUV sales and higher costs at its Mercedes-Benz Cars division than previously expected as a result of the tariffs, and "this effect cannot be fully compensated by the reallocation of vehicles to other markets."
It added that earnings at the Mercedes-Benz Vans division will be hit by the recall of diesel vehicles.
The tariffs and the threat of a trade war are already having an impact on businesses due to higher costs and uncertainty, Oxford Economics' Gregory Daco wrote in a Wednesday report.
The tariffs and retaliatory threats "have already added to inflationary pressures (with domestic producers raising their prices)," Daco noted. "Further, increased business uncertainty is weighing on investment."
Daimler said it now expects full-year earnings before interest and taxes to come in slightly below last year's level, compared with its previous forecast of a slight increase.
Daimler's shares were down 3.3 percent in early Frankfurt trading Thursday at 58.71 euros ($67.97).
Shares in Germany's other big automakers also were off following their rival's profit warning, with Volkswagen sliding 1.5 percent to 152.51 euros and BMW declining 1.9 percent to 81.83 euros.