Global businesses eye US expansion to lessen fallout from tariffs
ESSITY
The Swedish hygiene product maker could move more of its production into the US from Mexico and Canada, its CEO said in January.
LVMH
The luxury conglomerate is "seriously considering" bulking up its US production capacities, its CEO said in January.
ROCHE
The Swiss pharmaceutical giant will invest $50 billion in the US over the next five years, it said in April. On May 12, it announced additional $550 million investment to expand its Indianapolis diagnostics manufacturing hub.
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Euronews
3 hours ago
- Euronews
Tensions, clashes and low expectations loom over EU-China summit
The summit between the European Union and China, scheduled to take place on Thursday, comes at a pivotal moment for both sides. On paper, at least. Donald Trump's return to the White House has upended the geopolitical chessboard, undermining age-old alliances, inflaming simmering tensions and throwing global trade into head-spinning turmoil. The chaos is such that Brussels and Beijing, long at odds over a string of disagreements and recriminations, began toying with the idea of resetting ties and reinforcing cooperation to weather the Trump-induced storm. The fact that the summit coincided with the 50th anniversary of diplomatic relations only added to the speculation of an impending rapprochement. In May, Chinese President Xi Jinping said the anniversary offered a chance to "properly handle frictions and differences, and open up a brighter future for China-EU relations". Ursula von der Leyen, the president of the European Commission, and António Costa, the president of the European Council, played to the prevailing narrative, committing themselves to "deepening our partnership with China". But then the tide shifted and the tone soured. Beijing's decision to restrict exports of rare earths, the metallic elements that are crucial for manufacturing advanced technologies, caused widespread alarm across European industry and was rebuked by von der Leyen. "China is using this quasi-monopoly not only as a bargaining chip, but also weaponising it to undermine competitors in key industries," she said at the G7 summit in June. "We all witnessed the cost and consequences of China's coercion." Beijing immediately hit back at the Commission chief, calling her speech "baseless" and "biased", but offered an olive branch to build a "win-win" partnership. The damage was done, however. By the time von der Leyen and Costa meet with Xi on Thursday, there are scant expectations for any concrete solution. Hopes are so low for the meeting that officials in Brussels point to the fact of the one-day summit in Beijing happening at all as an achievement. (Under protocol rules, the summit was supposed to happen on EU soil, as both sides take turns as hosts.) "For the EU, the deliverable is a substantive, open and direct conversation between the two of us on every aspect of our relationship," a senior official said last week, speaking on condition of anonymity ahead of the occasion. A second senior official described the summit as a "unique opportunity" to communicate the bloc's concerns with the view of obtaining results "in the short term". "We go there with the expectation that the Chinese will first understand our concerns and, second, take concrete actions to meet our concerns," the official said. "Otherwise, we will have to defend our own interests." No-limits friction There are certainly no shortage of issues to be resolved, with myriad disputes straining EU-China relations since the COVID-19 pandemic. Among the extensive list of friction points, which range from cyberattacks against state agencies to human rights violations, two stand out: Beijing's "no-limits" partnership with Moscow and the trade imbalances caused by industrial overcapacity. For the past three years, Europeans have been aghast at seeing a permanent member of the United Nations Security Council stand firmly by the side of an aggressor nation in breach of the core principles of the UN Charter. Brussels has repeatedly accused China of acting as the "key enabler" behind Russia's full-scale invasion of Ukraine and supplying 80% of the components that the Kremlin uses to manufacture weapons. Several Chinese entities have been targeted by the bloc for enabling the circumvention of economic sanctions. Last week, two Chinese banks were blacklisted, triggering Beijing's fury. "We urge the EU to stop harming the lawful interests of Chinese companies without any factual basis," said Guo Jiakun, spokesperson of the Chinese Foreign Ministry. "China will do what is necessary to firmly safeguard the legitimate and lawful rights and interests of Chinese companies," he added. Von der Leyen and Costa are set to raise Ukraine during their face-to-face meeting with Xi, however unlikely their pleas are to be heard. The Chinese leader has shown no signs of wanting to disengage from Russia, attending Vladimir Putin's Victory Day parade earlier this year as guest of honour. "We can say that China is de facto enabling Russia's war economy. We cannot accept this," von der Leyen said earlier this month. "How China continues to interact with Putin's war will be a determining factor for EU-China relations going forward." An 'unsustainable' relation On trade, the stakes are equally high – and the expectations, equally low. The bloc has grown increasingly anxious about its ballooning deficit with China, which last year surpassed €300 billion in goods. The figure risks expanding in 2025 due to sluggish demand from Chinese consumers and Trump's prohibitively high tariffs. The European Commission has set up a special task force to monitor the potential diversion of Chinese products from the US to the EU market. The executive is also keeping a close eye on Beijing's lavish use of subsidies, which have been blamed for artificially lowering prices to the detriment of European competitors. "The present situation is unsustainable. We need rebalancing," said a senior official. The dispute came to a boil in October when the EU slapped steep duties on China-made electric vehicles (EVs) to offset the effects of state aid. Decrying the measure as a "naked act of protectionism", Beijing responded with probes into EU-made brandy, pork and dairy, which Brussels then denounced as unfair and unjustified. Another recurring grievance among Europeans is the regulatory barriers that China has erected to encroach upon the private sector and give preference to domestic companies. The row recently led the Commission to exclude Chinese providers of medical devices from European public tenders. Beijing retaliated with a similar ban. Initially, the July summit was considered the stage to reach a common understanding on these open fronts and announce tentative solutions to some of them. While the disputes will still be addressed as part of the busy agenda, the rise in tensions indicates they will remain unresolved as neither side believes the other is ready to relent. The only deliverable that von der Leyen and Costa can reasonably hope for is a joint declaration on climate action ahead of the UN climate conference later this year. Substantial concessions in other fields are improbable, warns Alicja Bachulska, a policy fellow at the European Council on Foreign Relations (ECFR). "Beijing appears confident that time is on its side," Bachulska said. "China's strategic calculus, dominated by its rivalry with the US, currently assesses the EU as too internally fractured to exert meaningful pressure or leverage on Beijing, thereby closing any perceived 'window of opportunity' for a significant reset in relations, despite US actions."
Fashion Network
3 hours ago
- Fashion Network
Luxury's split between winners and losers is only getting wider
One striking example of the sector's divide is LVMH versus French peer Hermes International SCA. Sales at LVMH's key Fashion & Leather Goods division are expected to have dropped 7.8% in the second quarter, according to analyst estimates. The company reports after the bell on Thursday. Hermes, which has been an example of how companies can thrive on selling the highest-end items, is expected to report revenue growth of 12% at its leather goods division. Its results are due on July 30. In the case of the Louis Vuitton and Tiffany & Co. owner, the stock has lost roughly half of its value over the past two years, losing its crown of Europe's biggest stock, with investors increasingly worried about an unprecedented demand slump in China. Hermes shares, on the other hand, are weathering the broader industry pullback. After a 160% jump since the end of 2020, the stock is little changed this year versus a 7% drop in Goldman Sachs Group Inc.'s basket of luxury shares. In the current economic context, pricing power is critical, said Helen Jewell, Europe, Middle East and Africa chief investment officer at BlackRock Fundamental Equities. 'The challenge for investors has been some of the names that we thought had greater brand strength, and it turned out they actually didn't,' she said, adding that there could be some buying opportunities after the selloff in the sector 'but you do need to be selective.' For the sector as a whole, the difference is stark between now and the 2021 to 2023 boom times, when investors were rushing to snap up any European luxury shares as they reaped the profits from shoppers on a post-pandemic spending spree. But with China's sluggish economy putting a dent into demand for pricey handbags and watches, investors are buying shares in the brands that can captivate consumers and selling the ones that can't. Among this year's winners, shares in Burberry have surged more than 30%. The UK fashion brand is gaining traction with its turnaround plan and winning new customers through its outwear push. To some investors, luxury valuations are still too high overall even after this year's plunge in a number of stocks. The industry has an average forward price-earnings ratio of 27, according to data compiled by Bloomberg. That's a near 85% premium to the broader market and above the long-term premium from the past 10 years. 'This is a sector that is fully exposed to tariffs and fully exposed to the weaker dollar,' said Roland Kaloyan, head of European equity strategy at Societe Generale SA. 'It's going to be quite difficult, so I stick to my underweight.'
Fashion Network
3 hours ago
- Fashion Network
Luxury heavyweights struggle to shake off shopper fatigue
LVMH and Kering are expected to report another drop in quarterly sales, deepening investor worries about a prolonged downturn in the 400 billion dollar luxury market as brands face the threat of hefty US import tariffs. The results, kicking off with LVMH on Thursday, will likely show that any revival in demand for pricey fashion in the key US and Chinese markets remains elusive. Uncertainty unleashed by US President Donald Trump 's trade war has caused volatility in stock markets, weighing on consumer confidence. Trump's threat of 30% tariffs on imported EU goods risks hurting luxury houses that make products in France and Italy. They will be wary of lifting prices for US consumers after signs that previous rounds of price hikes slowed demand. "The level of price increases has been too much" at a number of brands, alienating the "aspirational" middle-income shoppers, said Caroline Reyl, head of premium brands at Pictet Asset Management. LVMH's fashion and leather goods division, home to Louis Vuitton and Dior, is expected to show sales down 6% year-on-year, its fourth consecutive quarterly decline, according to a Visible Alpha consensus forecast. Gucci, Kering's main earner which is undergoing an overhaul, has struggled for twice as long and is seen reporting sales down nearly a quarter from a year earlier. After two years of slowing sales, unease about the health of the industry is growing, with customers balking at higher price tags. Shares of LVMH are down nearly 27% since the start of this year, while shares of Kering are down 15%. Shares of Hermes and Richemont, which cater to mostly wealthy clients, were little changed, with the former down 0.9% and the latter up 1.6% over the same period. LVMH, Europe's most valuable listed company as recently as January, has slipped to fifth place. "It seems that investors are starting to worry about the long-term structural attractiveness of the industry," UBS analysts said last week. Sales of handbags - previously a growth engine - have been weak as shoppers opt for timeless, investment-grade jewellery. Brands including Dior, Gucci and Chanel have recruited new designers, but it takes time for fresh styles to enter stores. Brands like Louis Vuitton and Prada are offering more products below 1,000 dollars, like a new hybrid ballerina-sneaker shoe, for example, and emphasising beauty products, said Bain consultants. But that carries risks. "The aspirational skew of the brand is unhelpful currently," said HSBC analysts, highlighting problems at Louis Vuitton. "Some inconsistencies, we feel, are likely starting to have consumers wonder." Consensus forecasts peg organic sales of LVMH down 3%, while Kering is seen down 13%; Hermes and Prada are expected to show a 10% rise, as Prada's Miu Miu label takes market share from rivals. Kering will report its results on July 29, while Hermes and Prada are due to report on July 30.
