Will Roadblocks In The Car Industry Slow The Global Economy Down?

Slowing demand for cars and increased competition from auto manufacturers preceded recent geopolitical shifts

May 19, 2025

Geopolitical shifts and tariffs are weakening the competitiveness of the car industry. Its footprint in the global economy – with over 5% of global manufacturing jobs, 11% of global R&D spending, and 4% of the global GDP – could have far-reaching implications.

With $108B in estimated tariff-related costs and more than 60% of U.S. consumers rethinking purchases, the signals are clear: the automotive sector is a bellwether.

Automotive industry headwinds preceded recent geopolitical shifts

Global car sales are growing more slowly in 2024 at 1.7%, compared to 2023 at 5.2%. Vehicles produced by new major Chinese car manufacturers in 2024 reached 14 million, meaning there's increased competition for automakers. And 2024 global inflation hit 5.9%, increasing car production costs.

 

And tariffs may deepen strains on supply chains, margins, and market demand

 

40% of the average US domestic car parts of the top 10 largest carmakers, while the estimated additional costs of 25% tariffs on US automakers in 2025 exceeds $108 billion. Sixty-one percent of US consumer swill likely not buy or buy less expensive vehicles due to tariffs.

 

...with potentially far-reaching implications for the global economy.

More than 5% of global manufacturing jobs are at risk, while 11% of global annual R&D may be affected. Four percent of global GDP could be impacted -- up to $4.4 trillion.