How do both microeconomic and macroeconomic factors influence the global automobile industry?

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The automotive industry is an extreme example of globalization, with supply chains than span the world and cars often manufactured far from the places where they are sold. This means that both macroeconomic and microeconomic issues in every part of the world affect both inputs and sales.

Perhaps one of the most important macroeconomic issues affecting the automotive trade is United States' President Trump's imposition of trade tariffs, a policy widely criticized by economists. Because trade tariffs affect the cost of steel and other inputs, this forces car manufacturers in the United States to either reduce margins or raise prices. While manufacturers could avoid this by moving production abroad, tariffs on imported cars also being imposed make this strategy impractical. Moving production to the United States would solve issues concerning tariffs on cars, but not the problem of increased costs due to tariffs on inputs. Over the long term, the disruption caused by these tariffs is likely to harm automotive industry profitability and raise prices for consumers.

Many other macroeconomic issues affect car buying. Global economic factors affect interest rates, employment, oil prices, cost of living, and consumer confidence. While these are all macroeconomic factors, they affect the microeconomic ones of individual car buying decisions.

Affordability is one area where microeconomic and macroeconomic factors intersect. If interest rates are higher, people must pay more to buy cars. If cost of living rises, people have less money and are less likely to buy cars or might choose more affordable models. High oil prices lead people to choose more efficient vehicles. People who are steadily employed receiving high wages are more likely to make large investments such as buying a new car than people employed precariously or struggling economically.

An important case study in microeconomic factors affecting the automotive industry was the rise of Toyota and relative decline of General Motors in the early twenty-first century. This was due to Toyota offering small, reliable, inexpensive, fuel-efficient cars while GM focused on building larger cars with a poor record for reliability. Consumers reacted by choosing to buy Toyota cars and GM went through bankruptcy proceedings. Eventually, GM reformed and focused on offering more reliable products that responded to customer preferences.

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