The Adverse Trump scenario could see more than a million fewer annual vehicle sales in the US

The 'Adverse Trump' scenario could see more than a million fewer annual vehicle sales in the US

The US light vehicle market could lose over a million units a year under the impact of a Trump administration in the White House according to analysis conducted by LMC Automotive.

LMC's analysis considers two scenarios and their impact on the US and global auto market.

In what it terms an 'Adverse Trump' scenario, LMC estimates that the US light vehicle market would decline from 17.45m units in 2016 to 16.26m units in 2020 (versus a baseline forecast of 17.6m units in 2020).

LMC's 'Adverse Trump' scenario assumes that many, though still not all, of the stated Trump policies are implemented. The resulting slowdown in the US economy, and declining trade flows between several of the world's largest economies, has far-reaching consequences around the globe, it says. It would also include more punitive tariffs on Mexican and Chinese goods, which is ultimately extended to other countries. A 'strong retaliatory response' would be expected.

The Adverse Trump scenario also cools global light vehicle market growth. LMC's baseline forecast sees the global market grow from 93m units in 2016 to 103m units in 2020, but under Adverse Trump, the 2020 projection is put at 99.4m units.

Large tax cuts in the US lead to government spending reductions that negatively impact GDP growth. Deportation of illegal immigrants and strong curbs on immigration are also enacted, further reducing US domestic demand and potential supply, adding to future inflationary pressures. In the Adverse Trump scenario the US economy would be reduced by 5%, relative to the current base case, by 2021. Global output would also be hit, by 2%, under the same measures.

Under what it terms a 'Moderate Trump' scenario, the global light vehicle market is projected at 102m units in 2020, with the US light vehicle market at 17.3m units.

The Moderate Trump scenario involves only partial implementation of stated policies. Under this scenario, limited tariffs are applied to Mexico and China, increasing prices for US consumers, though retaliatory measures also hit US exporters.

However, the overall effect is relatively muted and, once the immediate effects of trade and immigration pass, the economy recovers, LMC says.

The US light vehicle market is widely seen as 'topping out' or peaking in 2016 at around 17.4m units with little scope for further growth.

BaselineModerate TrumpAdverse Trump
201617.4517.4417.43
201717.4517.2417.04
201817.4717.2116.68
201917.5017.1216.40
202017.5917.2616.26

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