The Week in Breakingviews
Stick or twist. When the Swiss cement giant Holcim announced plans to spin off its North American business last year it appeared to be leading a corporate stampede across the Atlantic. The U.S. economy was motoring, fuelled by vast subsidies unleashed by President Joe Biden’s Inflation Reduction Act. American stocks were pulling away from the rest of the world. European companies were hobbled by high energy costs, stifling regulation, and low valuations. “With a US listing, we will unleash [the unit’s] full potential to be the partner of choice for customers in one of the world’s most attractive construction markets,” Jan Jenisch, Holcim’s chairman and CEO, declared at the time.
The Swiss company is pushing ahead: this week it published forecasts for the North American business, which it has christened Amrize. Yet the transatlantic divide no longer looks quite so wide. Donald Trump’s tariff threats and government cost-cutting are weighing on US growth, while investors have become more optimistic about Europe. The valuation gap has narrowed, too: the S&P 500 Index of leading U.S. equities is down 5% so far this year, while the STOXX Europe 600 benchmark has risen almost 7%. Jenisch, who will lead Amrize after the spinoff, remains optimistic. But investors are taking more of a wait-and-see approach. Others are recalibrating. The German utility RWE, for example, has scaled back its U.S. investment plans.
The U.S. dilemma is greatest for the world’s carmakers. Trump’s 25% tariff on imported vehicles - and on non U.S.-made car parts - will hurt almost every company selling automobiles stateside, with the exception of Elon Musk’s Tesla. They must now decide whether to absorb the tariffs or shift more manufacturing to the U.S. Both would probably mean raising prices - something Trump has told them not to do. Reciprocal tariffs planned for the coming week will further complicate the picture.
The United States remains the largest market for many global companies. Its stock exchanges still exert a strong gravitational pull. Swedish fintech Klarna is pitching prospective U.S. investors; Israeli trading platform eToro is planning the same. But the corporate stampede has lost some of its force.
Five things I learned from Breakingviews this week:
US white-collar crime cases have almost halved since 2010.
China’s workforce is set to shrink to 645 million people by 2045.
UBS’s equity capital is equivalent to more than 7% of Swiss GDP.
US auto tariffs could reduce European carmakers’ earnings by more than a third.
Chocolate makers like Mondelez and Lindt are experimenting with lab-grown cocoa.
Copywriter | Translator | Copy-editor | Romanian Communication Strategist | Digital Marketing Specialist
6moVery insightful analysis, Peter. I've noticed many of these global companies were indeed repackaging existing investments rather than committing new capital. From a European market perspective, US expansion might be a solution to European market woes, such as energy costs and overregulation. Trading EU's regional stability for US turbulence and policy uncertainty is certainly not an easy tradeoff.
Honorary Research Fellow at Queen Mary University of London
6moWhat Trump is showing is that America believes it can unilaterally tear up any international agreement it has signed. The cross-border supply chains built by automakers stemmed from the trade agreement negotiated between the US, Canada and Mexico during Trump’s first. It replaced NAFTA. Why should any country sign a deal with the US if the US has no intention of keeping its part of the bargain?
Journalist. MA-Business and Economics from Columbia Journalism School. Ex Reuters.
6moGiven recent context I read it as corporate stampede across The Atlantic and was confused for a second :)