How Hitachi hedges against a global trade war

Andreas Schierenbeck runs Hitachi Energy, a $13 billion business headquartered in Switzerland. Its Hitachi parent company, meanwhile, is based in Japan. But the maker of  transformers and high-voltage switchgear nevertheless has geography on its side, Schierenbeck told me. That’s because when it comes to production and supply chains, Hitachi hedges its bets.

Some of its largest manufacturing facilities are in Finland, Germany, and India, but it equally produces for the U.S. In the U.S., and for Japan in Japan. In September of last year, before even the Trump election, it announced $80 million worth of new facilities in Virginia and Boston to keep up with growing U.S. Demand. At the same time, it invested another $75 million in its Mexico manufacturing site to service the U.S. Market. “We’re analyzing all kinds of scenarios,” Schierenbeck told me. 

But perhaps the best natural hedge is the last one: to find a niche global market, in which competitive pressure is moderate, and the growth outlook and margins are high. If you can’t name Hitachi’s competitors in the market for high-voltage switchgear, transformers, or grid automation, I can’t blame you. (They include Mitsubishi, Siemens, GE, and Schneider Electric.) Combined, this is a $90 billion industry with growth rates reminiscent of China in the early 2000s, and EBITDA margins Jack Welch would be proud of.

While Schierenbeck is certainly tuned-in to the rising rhetoric out of Washington D.C., he’s focused on what he can control. A trade war, he said, was less of a concern than “being too lazy or complacent.” As long as he can fight that, “We have decades of growth ahead of us.”

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The markets

• The S&P 500 index closed up yesterday 0.4% and that appears to have set a tone: Asian markets are all up and indexes in the UK and Europe are currently sitting at record highs. Remarkably, U.S. Futures contracts were also moving up, pre-opening bell.

From the analysts

• Goldman Sachs on tariffs and inflation: “Applying our rule of thumb that every 1pp increase in the effective tariff rate raises the core PCE price level by 0.1%, we now estimate that tariffs will provide a one-time boost to year-on-year core PCE inflation of 0.5pp (vs. 0.3pp previously), leaving it at 2.6% in December. If tariffs on Canada and Mexico are implemented, we would instead expect inflation to peak just above 3%,” per Jan Hatzius et al.
• Convera on Trump’s mindset: “For some, his old-fashioned vision of trade and global economics dates back to the 80’s; ‘I believe very strongly in tariffs,’ said Mr. Trump, then a Manhattan real estate developer. Criticizing the trade practices of Japan, West Germany, and South Korea, he asserted; ‘America is being ripped off. We’re a debtor nation and we have to tax, we have to tariff, we have to protect this country’. Same rhetoric, same ideas on protectionism, with very little logic or rationale in today’s context, given the region’s trade interconnection,” per Kevin Ford.
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• JP Morgan on Meta and Alphabet: “Why does Google get hit on another year of heavy infrastructure investment while Meta’s 60%+ capex increase in 2025 is embraced by the Street? We believe because: 1) the return on AI investments is more apparent in Meta’s core advertising business; & 2) there are broader concerns about sustainability of Google search growth,” per Doug Anmuth et al.

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