Global Automotive Sector Faces Downgrade

Fitch Ratings has adjusted its 2025 global automotive sector outlook to "deteriorating" from "neutral", a move prompted by the recent imposition of US tariffs on imported vehicles. This decision, made on March 26, is expected to lead to production cuts and increased costs, potentially affecting profitability and free cash flow margins in the short term.

Consumer Demand and Market Strength at Risk

The agency highlights that the robustness of the US and Chinese automotive markets, which previously supported a neutral outlook, is now under threat. Weakening consumer demand, fueled by tariff-related uncertainties and possible price increases, is a significant concern. Fitch anticipates that both automakers and suppliers will bear the brunt of these higher tariffs.

Broader Implications Across Sectors

Following the Trump administration's escalation of its tariff policy, Fitch has also revised outlooks for several other sectors, including energy, banking, and global trade with China. These changes reflect the wide-ranging impact of tariff policies on the global economy.