Trade wars compound economic risks for automotive supply chain

US China trade war

The impact on tariffs and especially of uncertainty in key trading regions including the US, China and Europe are having real impacts on the automotive supply chain, according to a new report by Automotive from Ultima Media’s new business intelligence unit.

Ongoing sanctions by the US government on China, Iran and Russia are escalating a global trade war that has hit consumer confidence and contributed to falling demand for new vehicles and reverberating across the supply chain.

The impact on China, which is heading for its second straight year of declining vehicle sales, is significant for the global automotive sector, including the profits of major vehicle manufacturers.

Tariffs are also making raw materials, components and ultimately finished vehicles all more expensive for the consumer, which is impacting sales volumes. China’s latest round of tariff increases, for example, has targeted US-built vehicles – with the factories of premium OEMs like BMW and Mercedes-Benz most impacted. 

From the OEMs and automotive supplier perspective, all of this is impacting confidence to invest in new models, production capacity and new products. In the UK, meanwhile, the spectre of a no-deal Brexit, and its impact on tariffs and just-in-time supply chains, has essentially shut down automotive investment.

According to Daniel Harrison, automotive analyst at Ultima Media, the real issue is one of uncertainty, as he outlines in a new forecast and report on the state of the global automotive sector.

“Industry could plan if it knew for certain what the trade tariffs were going to be,” writes Harrison. “The business risk therefore comes not from the tariffs per se, but from the erratic, unpredictable outlook of a trade war with a trajectory determined by the whim of President Trump’s latest tweet.”

Harrison’s report, ‘Automotive headwinds align into a perfect storm’, is the first in a series of analysis and research from Ultima’s new global automotive business intelligence unit.

A full copy of the report is available to download for free by registering or signing in to Automotive Logistics.

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