Our international sales and operations are subject to risks associated with changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, taxation, foreign exchange controls, capital controls, local manufacturing, product content or supplier requirements, employment regulations and the repatriation of earnings. Government policies on international trade and investments such as import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, whether imposed by individual governments or regional trade blocs, can affect demand for our products and services, impact the competitive position of our products or services, or encumber our ability to manufacture or sell products in certain countries. International transactions also involve increased financial and legal risks due to differing legal systems and customs in foreign countries, which could result in increased costs, risk of fines or penalties as well as reputational harm. Our international sales and operations are also sensitive to changes in foreign nations’ priorities, including government budgets, as well as to political and economic instability.
The implementation of more restrictive trade policies, including tariffs and retaliatory actions in response thereto, or the renegotiation of existing trade agreements with the U.S. or countries where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees (see discussion on China below), could have a material adverse effect on our business, results of operations and financial condition. These impacts may include hindering our ability to recruit and retain employees or deploy certain employees to the geographies where their skills are best utilized, increased costs for our customers, declining consumer confidence, significant inflation and diminished economic expectations, which could ultimately reduce demand for our products. While we take steps to mitigate or avoid these increased costs, disruptions and legal risks due to changes in trade policies, our ability to do so may be limited by operational and supply chain constraints, especially in the short term. In addition, our ability to recover cost increases and maintain profitability levels through price adjustments may be limited by competitive pressures, customer acceptance, and contractual limitations. Tariff actions by the U.S. and retaliatory actions by other countries have caused, and may in the future cause, significant disruption and volatility in the financial markets, which could adversely affect the availability, terms and cost of capital, including with respect to refinancing our existing debt, and which in turn could reduce our cash flows and harm our business.
China is currently the largest end market for sales of new equipment in our industry, with our New Equipment net sales in China representing approximately one fifth of our global New Equipment net sales and over half of our global New Equipment unit volume and a growing part of our Service segment. Changes to market and economic conditions in China, including credit conditions for our customers, have recently impacted and may continue to impact our ability to maintain New Equipment net sales in China at rates consistent with prior years as well as future growth of our Service segment. Additionally, the escalation of trade conflicts between the U.S. and China could further impact economic conditions in the U.S. and China. Furthermore, as is the case in many countries where we operate, China could impose additional regulatory and legal requirements, including requirements that could increase costs in China and/or restrict access to Chinese markets, which could negatively impact our overall financial performance.