Daimler’s profit warning has sent the share prices of European car manufacturers tumbling

Daimler, the maker of Mercedes-Benz, has warned that profits will be lower this year as a result of US-China trade tensions, which has seen share prices in other European carmakers fall in tandem.

Daimler has said it is considering “possible strategic options” while cutting its profit forecast, following a warning from China that it will impose a tax on US imports.

The news follows a proposal from US President Donald Trump that he would impose tariffs on imported vehicles, arguing that the current trade imbalance poses a national security risk.

Read more: Trade war fears spook markets after Trump threatens China with tariffs

Daimler has several large factories in the US, which exports cars from Alabama to China. Additionally, Mercedes-Benz’s record sales in the first quarter of this year were largely led by China, where sales increased by 17 per cent.

As a result of the profit warning, automotive stocks have sunk to a nine-month low on European markets as investors begin to worry that other European manufacturers might follow Daimler’s lead.

German car maker Volkswagen’s share price was down by 2.16 per cent in late-afternoon trading, while Daimler’s share price was down 3.79 per cent.

In France, Renault was down 0.8 per cent, and Peugeot was down 2.05 per cent.

Daimler said in a statement:

“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 US vehicles into the Chinese market.”

“This effect cannot be fully compensated by the reallocation of vehicles to other markets.”