Fitch Ratings Revises Global Automotive Sector Outlook

In a significant move, Fitch Ratings has downgraded its 2025 global automotive sector outlook from "neutral" to "deteriorating." This revision, announced on Wednesday, is primarily attributed to the recent US tariffs on imported vehicles, which were imposed on March 26. The agency highlights the potential for these tariffs to lead to production cuts and increased costs, adversely affecting profitability and free cash flow margins in the short term.

Impact on US and Chinese Automotive Markets

The agency pointed out that the previously observed strength in the US and Chinese automotive markets, which supported a neutral outlook at the end of 2024, is now weakening. This downturn is driven by consumer demand faltering due to tariff-related uncertainties and the prospect of price hikes. Fitch anticipates that both automakers and suppliers will bear the brunt of these higher tariffs.

Broader Sector Implications

Following the Trump administration's escalation of its tariff policy, Fitch has adjusted its outlooks across various sectors, including energy, banking, automotive, and global trade with China. These changes reflect the broader economic implications of the administration's trade policies.