Munich: Volvo Cars has become the latest victim of intensifying global trade tensions, prompting the automaker to delay plans for a share sale and make sweeping changes to its production network to lighten the burden of higher export barriers.

Less stable market conditions that are especially weighing on carmakers have made the timing of a listing “not optimal," Chief Financial Officer Hakan Samuelsson said on Monday in a phone interview. The move comes after initial investor feedback in July was said to value the company, owned by China’s Zhejiang Geely Holding Group Co., far below top-end estimates.

Volvo’s backtracking from plans — said to involve a share sale as early as this fall in Sweden and Hong Kong — shows the worsening strain from trade conflict that’s dragging on earnings and valuations of carmakers like Daimler AG and BMW AG. Volvo exports vehicles from China to the US, and had planned to do the reverse from a new factory in Charleston, South Carolina. Those plans are no longer viable as China and the US engage in a tit-for-tat trade war resulting in higher tariffs on both sides, Volvo said.

“The issues around trade are hard for us because they impact cars shipped between China and the US. It’s a huge drawback," Samuelsson said. “The risk is that these headwinds will increase."

Higher tariffs

BMW and Daimler, who both export sport utility vehicles from the US to China that now contend with higher tariffs, are trading at price-to-earnings valuations of 5.5 and 6.2 times, the lowest since at least 2014. In addition to that conflict undermining global production setups, President Donald Trump has threatened to impose steeper barriers on imports from the European Union.

Volvo produces the top-line S90 sedan and compact XC60 SUV at its Chengdu and Daqing plants in China. About a quarter of the vehicles are exported, with most going to the US. Last week, Trump doubled down on his threats to impose higher tariffs on the nation’s goods saying he’s ready to tax all imports “at short notice." Since July, China raised import levies on cars from the US to 25%, up from 15%.

As a result, Volvo plans to use its plant in Torslanda, Sweden to ship cars to the US instead, Samuelsson said, adding the impact on the XC60 would be “ok to mitigate" while the S90 would be “more difficult." He declined to elaborate on the financial impact of the higher tariffs.