Trade disputes and a tightening credit cycle pose risks for U.S. financial institutions, S&P Global Ratings noted in a report released earlier this month.
“The hallmark of the auto finance industry is its access to credit and keeping the needle moving,” Jeremy Acevedo, manager of industry analysis at Edmunds, told Auto Finance News. “If [credit availability] dries up, there’s going to be a bad reaction from consumers returning to the [new-car] market.”
Additionally, “further escalation in trade tensions and threat to global supply chains seems unavoidable,” according to S&P.
Despite an agreement reached Dec. 1 between President Donald Trump and Chinese President Xi Jinping that neither the U.S. nor China would increase tariffs in the next 90 days, industry analysts still worry about potential vehicle price increases that would trickle down to lenders, dealers, and consumers.
“Critically, [last] weekend[‘s] agreement is only a temporary ceasefire in the trade war,” Nelson Dong, senior partner at international law firm Dorsey & Whitney, told AFN. “It begins a 90-day window for the U.S. and China to reach a much broader agreement on trade- and investment-related issues that had sparked the punitive tariffs and counter-tariffs during 2018.”
Additionally, U.S. tariffs remain in place on steel and aluminum imports from Mexico and Canada, despite the free-trade agreement between the three countries. With no clear path for a compromise between China and the U.S., the outlook for global trade and the status of potential tariffs remains uncertain, Dong said.
