Look for auto prices to go higher as US-China trade friction drags on, says Morgan Stanley

  • Disruptions in global trade will lead to inflation in the auto industry, warns Adam Jones, Morgan Stanley's chief U.S. auto analyst.
  • As the costs of doing business increases, "that's going to either make cars more expensive, which will hurt demand, or hurt margins," he told CNBC at the Morgan Stanley Asia Pacific Summit on Thursday.
Sprinter Van being assembled at the Mercedes-Benz Vans plant, in Ladson, S.C. 
Meghan Reeder | CNBC
Sprinter Van being assembled at the Mercedes-Benz Vans plant, in Ladson, S.C. 

Morgan Stanley has warned of higher car prices following signs of further escalation in the U.S.-China trade war.

U.S. Trade Representative Robert Lighthizer announced Wednesday that he was examining ways to raise duties on Chinese vehicles to 40 percent, which is the tax that Beijing now levies on American-made cars. Such tensions are likely to hurt both auto consumers and manufacturers, Adam Jones, Morgan Stanley's chief U.S. auto analyst, told CNBC's Sri Jegarajah on Thursday.

"The auto industry is the quintessential global supply chain," Jones said at the Morgan Stanley Asia Pacific Summit in Singapore. "Any disruption of trade — be it between China and the U.S., or Europe and the U.S. or Japan, you name it — is going to lead to inflation."

But as the costs of doing business increases, "that's going to either make cars more expensive, which will hurt demand, or hurt margins. Probably a little of both," he continued.

GM transitioning to Auto 2.0

Regarding General Motors, which announced plans on Monday to cut more than 14,000 North American jobs, Jones called the move "extraordinary."

He noted how unusual it was for an auto company to launch such a visible cost-cutting effort ahead of Christmas and following a record third quarter. "We think they might be seeing something that investors aren't seeing or about to find out."

The company is likely making the pivot to "Auto 2.0," he said. The term refers to structural shifts in the global car market, namely the rise of autonomous vehicles and the shared economy business model.

GM is "making room for that transition while the getting is good,"Jones said. "It's going to be really hard to do during a downturn."

WATCH:How automakers sell a $71,000 version of a $27,000 car