• 6 hours Trump Wants Another $2 Trillion Economic Intervention
  • 24 hours The Surprising Businesses Deemed “Essential” During The Coronavirus Lockdown
  • 1 day Priceless Van Gogh "Spring Garden" Painting Stolen
  • 1 day Oil Falls To $20 For First Time In Nearly Two Decades
  • 1 day COVID-19 Could Be The End Of U.S. Coal
  • 2 days How Much Does Your Social Security Number Cost? $4 On The Dark Web
  • 3 days Silver Stocks Have Been Decimated In The Coronavirus Sell-Off
  • 4 days How Blockchain Tech Could Make Mergers And Acquisitions More Efficient
  • 4 days America’s Shortage Of This Metal Keeps Trump Up At Night
  • 5 days Bidet Bonanza: Defying The Toilet Paper Shortage
  • 5 days U.S. Auto Sales Fall By 75%
  • 6 days Violating Quarantine? Big Brother Is Watching
  • 6 days Does Gold Still Have Some Room To Run?
  • 6 days Major Acquisition Gives The World’s First Green Ride-Share Another Edge
  • 7 days U.S. Pushes For Digital Currency For Immediate Stimulus
  • 7 days The Impossible Challenges Created By Growing Population
  • 7 days Gold Skyrockets After Fed Pledges "Unlimited" Cash To Boost Economy
  • 8 days World’s Richest Lose $1 Trillion In Stock Market Rout
  • 8 days Gas Stations Shut Down In Venezuela As Coronavirus Crisis Intensifies
  • 8 days The Best And Worse Case Scenario For The U.S. Stock Market
Output In World's Largest Copper Mine Is Falling

Output In World's Largest Copper Mine Is Falling

Chile’s Codelco, the world’s top…

New Tech Could Restart The Lithium Boom

New Tech Could Restart The Lithium Boom

A research team is close…

  1. Home
  2. Commodities
  3. Industrial Metals

Auto Industry In Biggest Slowdown Since 2008

Car

President Trump loves to use the auto industry as a bargaining chip. In May, he asked the Commerce Department to investigate whether a national security law could be used to impose hefty tariffs of up to 25 percent on car and auto part imports into the United States, mainly targeting Europe and China.

Although the tariffs are yet to be implemented, the damage has already been done. Global auto sales are on track to record the biggest slowdown since the 2008 financial crisis as a confluence of factors--including unfavorable global trade policies and high commodity prices--meets falling consumer demand.

Not surprisingly, Europe and China are expected to record the largest slowdowns.

Demand in Europe is already starting to drop to pre-recession levels. Meanwhile in China, new car sales fell 5.3 percent to 1.59 million units in July due to worsening trade tensions with the U.S. Although full-year forecasts still call for a 1.2 percent growth, it will mark a sharp slowdown compared with growth of 13 percent in 2016 and 2.1 percent in 2017. China is the world’s largest auto market with 28.6 million new cars sold in the country last year.

America Hard Hit, Too

But most alarming is the fact that demand for American vehicles, considered a universal global catalyst, has also hit a wall due to economic factors such as higher prices and rising loan rates as well as political ones amid a growing “don’t buy American” media wave. Related: Markets See Mixed Sentiment After Hitting A Record High

A key reason for that are retaliatory tariffs by Beijing, which now taxes U.S.-built vehicles an impossible 40 percent levy on import. Major American automakers including Ford and Fiat Chrysler Automobiles have been counting on selling more in the Chinese market in order to cut their high dependence on North American sales. That is not being helped by soft demand in Europe, where many American companies have been struggling to maintain profitability.

The situation is already dire—all major American manufacturers posted a sharp sales decline in July, led by a massive 15 percent plunge at Nissan Motor. The mere anticipation of more tariffs prompted the auto industry to cut back spending on incentives thus snapping a long 55-month streak of increases.

After peaking in 2016 at 17.5 million units, U.S. new vehicle sales are now on track to post the second consecutive year of sales decline.

Not all of it can be pinned on trade tensions though.

According to Charlie Chesbrough, senior economist for Cox Automotive, buyers are increasingly turning to used-car lots where there are great deals to be had even as auto makers pull back on new-vehicle incentives. Returns of leased vehicles has also been climbing, and the extra supply gives consumers a wider choice of lower-priced alternatives.

Actual Tariffs Will Escalate the Damage

It’s going to be a lose-lose proposition if Trump barrels ahead with the planned tariffs especially in Europe.

Related: Telcos Caught Between Big Government And Customer Privacy

The EU has estimated that duties of 25 percent would cut U.S. imports of cars and car parts by half and lead to the loss of at least 180,000 American jobs. The U.S. imported automobiles and car parts worth 294 billion euros last year, with 58 billion euros originating in the EU. The U.S. is the largest importer of EU cars, with cars making up a fifth of the region’s exports.

Major U.S. importers of European cars General Motors, Nissan and Fiat did brisk business during the first half of the year as customers rushed to buy ahead of the tariffs.

Potential tariffs on both imported cars and auto parts will no doubt make the unfolding scenario a lot worse.

By Alex Kimani for Safehaven.com

More Top Reads From Safehaven.com

Back to homepage

Leave a comment

Leave a comment