- In today’s CEO Daily: A European scooter maker tells Peter Vanham why the tariffs won’t make them open a factory in the U.S.
- The big story: Trump isn’t backing down on the tariffs despite global opposition.
- The markets: A brief period of respite.
- Analyst notes from JPMorgan, Wedbush, UBS, and Goldman Sachs on Trump, tariffs and recession.
- Plus: All the news and watercooler chat from Fortune.
Good morning. The U.S. stock market has registered its feelings about tariffs, with all the major indices reeling after days of losses. But how are foreign companies reacting? The scooter and carmaker Micro sells over half a million kick scooters a year in the U.S. But going forward, the scooters may get a lot harder to find, and become a lot more expensive, OIiver and Merlin Ouboter, the company's second-generation executives, told me.
Facing President Trump's tariffs of up to 54% on any goods made in China (where Micro makes the majority of its products), the Ouboters offer a playbook on how foreign companies plan to respond. They certainly aren’t scrambling to move manufacturing to the U.S. Instead, they told me, they're preparing to pull some of their products off the U.S. market, and hope consumers will pay a higher price for the remaining ones.
“As a company, you wouldn’t invest in producing in the U.S. now," Oliver Ouboter told me. "I don’t even know if the tariffs are going to hold up for three months. It’s kind of impossible to plan. So all these products will just become more expensive. There will be less variety.”
The lowest-priced products are most likely to disappear from Micro's U.S. offering, since the margins are the smallest. Its premium kickboards, on the other hand, will likely be priced higher, as the company plans to pass some of its additional levies on to the consumer.
And Micro’s Microlino car, an Italian-made golf cart on steroids may never make it to the U.S. at all, despite having previously been set for launch there this summer. With a quirky, minimalist design and just two narrow seats, the fully electric mini car would have always been a long shot in the country of SUVs. “But with a 25% tariff, you outprice yourself,” the Swiss entrepreneur said.
In this, Micro is not alone—all European and Asian car makers are facing the same brutal math. “Let’s imagine a scenario in which you have 25% tariffs today. And then sometime in the future it isn’t 25% anymore. Then you have huge fluctuation of prices. It is impossible,” Ouboter said.
Nor is moving car manufacturing a solution for all foreign brands, he said. To make the Microlino in the U.S., the OEMs he sources his parts from would need to move first. And even so, the influx of other manufacturers—in every sector from cars to pharmaceuticals to textile—would mean labor costs and prices would get out of control.
“If you look at the unemployment rate, if all these companies start manufacturing in the U.S., you need people. Where do you get them from? The prices will go even higher, because you will need to pay people even higher. There will be massive inflation on all goods,” Ouboter said.
As for the hit to revenues, Ouboter didn't seem overly worried. He pointed to the remaining growth potential in Asian markets such as South Korea and European markets such as Germany, Switzerland and the U.K., where Micro still gets a majority of its revenues. "We'll focus on innovations for their older populations, making our products more accessible in these markets," he said. — Peter Vanham
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Contact CEO Daily via Diane Brady at diane.brady@fortune.com
