Why Tariffs Are the Biggest Concern for Autos since 2009 Crisis

US auto sales

Roughly a decade ago, the US auto industry became the victim of one of the worst financial crises in history. In 2008 and 2009, Detroit-based auto giants such as General Motors (GM) and Chrysler had to take a trip to bankruptcy court. US light vehicle sales in 2008 and 2009 witnessed steep declines of 18% and 21%, respectively. In 2016, the US auto sales recovered to their all-time high of 17.55 million vehicle units, which was followed by slightly softer sales in 2017. America’s ongoing trade tension with China and the European Union could become the biggest worry for the auto industry since the 2009 crisis.

Why Tariffs Are the Biggest Concern for Autos since 2009 Crisis

Trade tensions could hurt sales

If the Trump administration decides to impose heavy tariffs on imported vehicles from China or Europe into the US, the affected nations are likely to retaliate immediately by increasing their tariffs on vehicle imports from the US. These higher tariffs could force global automakers to pass on the increased costs to consumers, which should lower the auto sales going forward. Therefore, global automakers (FXD) including GM, Ford (F), Fiat Chrysler (FCAU), and Toyota (TM) are going to be the real victims of these rising trade tensions going forward.

Trump’s previous moves

In March 2018, the Trump administration imposed a 25% tariff on steel and a 10% tariff on aluminum imports. This move led to a rally in steel and aluminum prices, increasing raw material costs for automakers.

Now let’s see what GM has to say about the escalating trade war.