Machinery and autos most at risk from trade war escalation
A closer look at the sectors most vulnerable to the next phase of trade conflicts
Mechanical engineering and motor vehicles stand out as the biggest losers within manufacturing if the trade war escalates following the August 1st tariff deadline.
Domestically-oriented sectors, such as food and beverages, would be the least impacted. Demand for food products tends to be relatively stable due to their essential nature, while the perishability of output combined with low product complexity ensures supply chains are short.
US autos are hit hardest by the removal of USMCA exemptions and a 33% effective tariff rate in our worst-case scenario. Rising input costs that follow boost inflation and strain US competitiveness, which disproportionately impact industrial activity.
Manufacturing sectors with high export exposure to the US, such as those in China, Canada and Mexico, face a steep downside in our worst-case trade scenario. By contrast, India’s lower trade exposure to the US makes it the least vulnerable.
Construction faces even greater upside and downside potential than manufacturing in our trade scenarios. In our worst-case trade war scenario, investment-driven uncertainty and elevated material costs weigh heavily on production growth which slips into negative territory by 2026.
Download the full report to see how these trade tensions could impact your industry.
