Global Automotive Sector Faces Challenges

Fitch Ratings has downgraded its 2025 global automotive sector outlook from "neutral" to "deteriorating," pointing to the recent US tariffs on imported vehicles as a significant factor. The decision, announced on Wednesday, reflects growing concerns over the impact of these tariffs on the industry's profitability and free cash flow margins.

Impact of US Tariffs

The agency highlights that the tariffs, imposed on March 26, could lead to production cuts and increased costs. "The relative strength of the US and Chinese automotive markets, which supported the ‘neutral’ outlook at end-2024, is faltering due to weakening consumer demand driven by tariff-related uncertainties and potential price hikes," Fitch stated.

Broader Sector Revisions

Following the Trump administration's aggressive tariff policies, Fitch has also adjusted its outlooks for several other sectors, including energy, banking, and global trade with China, signaling widespread economic repercussions.