The U.S. unemployment rate could have a bigger impact on European car makers than a possible change in price because of President Trump’s threat to impose 25% tariffs on them, according to a new report from Morningstar.
The equity research team found that for every percentage point change in real, new auto consumer-price index (CPI) and in the rate of unemployment, U.S. light vehicle demand varied on average by around 116,000 and 928,000 annual units respectively since 1980.
At present, the EU imposes a 10% tariff on imported U.S. cars, while the U.S. tacks on a 2.5% tariff on passenger cars made in Europe and a 25% tariff on imported pickup trucks.
Check out: MarketWatch’s package of tariff-related stories
The tariffs would particularly affect German car makers which last year sold 1.35 million new vehicles in the U.S., according to the VDA, the main lobby group for Germany’s auto industry.
Global Automakers, the body which represents foreign auto makers in the U.S., warned in June that a $30,000 imported car could see a price rise of $6,000 if tariffs on car imports were imposed.
Richard Hilgert, senior equity analyst at Morningstar, said: “If international trade conflict heats up, our forecast would need to be adjusted depending on the tariffs implemented. We included the assumption that the U.S. economy would gradually cool, reducing our forecast to about 14.9 million light vehicle sales volume in 2020, before a mild recovery in 2021 and 2022.”
Shares of Stoxx Europe 600 Autos and Parts Index
SXAP, -0.76%
a popular gauge of Europe’s auto market, is down 10.5% so far in October and on track for a 22.1% year-to-date decline.
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Source : MTV
