UK Markets closed

Trump tariffs and China woes trigger worst crisis for global car industry in 20 years

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
A trailer transports newly manufactured cars at a port in Dalian, China. Photo: Reuters

The tariff wars and sanctions initiated by US president Donald Trump are threatening to tip the automotive industry into a major crisis, according to a report published by the Center for Automotive Research Institute at Duisburg-Essen university on Wednesday.

Based on CAR’s analysis of sales up to May, its forecasts that global demand for new cars will shrink by more than 4 million units in 2019 compared with the previous year.

“If the US president carries through his latest threat to impose further punitive tariffs on more $300bn [£232bn] in US imports, there is a danger of a global car crisis,” according to study author Ferdinand Dudenhöffer.

There is a high risk that global automotive sales will fall more than 5% to 79.5 million new cars in 2019, the study said. It notes that currently the world’s car market is in the grip of its biggest slump in 20 years — worse than what it went through during the 2008-2009 global financial crisis.

While dwindling consumer confidence is impacting demand in the US and Europe, the study highlights the slowdown in the Chinese car market as a key reason for concern. It anticipates a 10% sales decline for 2019 in China. Last year, the Chinese market, with 23.3 million vehicles, accounted for 28% of global production.

Figures released on Wednesday by the China Association of Automobile Manufacturers showed that China had its worst-ever sales month in May, with a 16.4% monthly drop than a year ago, and the eleventh straight month of decline.

While the fierce trade war between Washington and Beijing is hurting Chinese new car sales, Western automakers, who make much of their profits in China face another huge challenge after the earlier-than-planned introduction of new emissions standards.

The CAR study’s predictions for a global crisis in the car industry does not take into account potential fallout from a no-deal Brexit, nor Trump’s ongoing threat to impose tariffs on car imports from the EU.