- President Trump's 25% tariff on import vehicles went into effect last week.
- Industry watchers predict tariffs could add $3,000 to $15,000 to car prices.
- Experts say if you have a new vehicle purchase in mind, don't wait.
Ready to take the plunge on a new ride but feeling in a quandary amid the ongoing tariff tumult?
In case you haven’t kept up with the deluge of trade policy changes, pauses and redos over the past couple of weeks, here’s the current status of new, sector-specific levies as they apply to the automobile industry.
Late last month, President Donald Trump announced a new 25% tariff on “all cars that are not made in the United States.”
Which vehicles are impacted by new tariffs?
During the March 26 announcement from the Oval Office, White House aide Will Scharf said that the new levy on “foreign-made cars and light trucks” will be added to current tariff assessments and will result in “over $100 billion in new annual revenue to the U.S.”
The president said the new levy, besides generating new revenues, would provide a direct boost to U.S.-based auto manufacturers.
“This is very exciting.” Trump said. “This is going to lead to the construction of a lot of plants, in this case auto plants. You’re going to see numbers like you’ve never seen in employment. A lot of people making a lot of cars.”
Trump also predicted that the strategy would lead to lower vehicle costs for U.S. consumers.
“You’re going to see prices going down, but it’s going to go down specifically because they’re going to buy what we’re doing, incentivizing companies and even countries with companies to come into America and build,” Trump said.
Last Thursday, that new tariff began and while Trump and his team are touting the long-term economic benefits of the plan, industry analysts say consumers should expect to see vehicle prices move up significantly.
How tariffs are expected to impact prices
While the new trade assessment specifically targets new vehicles imported into the U.S., industry experts are predicting price impacts from the tariffs will play out more broadly, including on the costs of the domestic and used vehicle markets.
“We expect to see declining discounting and then accelerated price increases as the tariffs are passed through and supply tightens, leading to price increases on all types of most new vehicles,” Cox Automotive chief economist Jonathan Smoke said during a virtual event Monday, per a report from CNBC. “Over the longer term, we expect production sales to fall, newly used prices to increase, and some models to be eliminated.”
One estimate from a Goldman Sachs analysis pegs the potential price increases in the range of $5,000 to $15,000, depending on the vehicle.
In an April 4 report, Cox Automotive notes the current average price of a new vehicle in the U.S. is north of $48,000. Notably, according to Cox, more than 40% of new-vehicle sales by volume in 2024 were priced under $40,000 and these “lower-priced” vehicles are particularly vulnerable to the new tariffs.
The Cox analysis suggests the 25% tariff on imported vehicles will apply to nearly 80% of vehicles priced under $30,000. Vehicles in this category include popular models such as the Honda Civic, Toyota Corolla, Chevy Trax and Trailblazer, Nissan Sentra and Honda HR-V.
When should you buy?
So, what’s the best move if you’re currently in the market for a new vehicle? Experts are saying, don’t wait.
“The riskiest thing to do is to hold off and see what happens,” Aaron Bragman, the Detroit bureau chief of automobile shopping site Cars.com, told CNN. “We’re fairly confident that costs and prices are going to go up — that’s just the basic economics of tariffs.”
While current inventory on U.S. dealer lots is “decent”, Bregman warned manufacturers are likely to cut production as higher prices decrease demand and lower inventories could also create upward price pressures.
Higher new vehicle prices are also likely to drive more buyers to the used vehicle market and, as that inventory drops, prices in that market are expected to rise.
According to recent data from CarGurus, the current average price of a used vehicle in the U.S. is nearly $27,500.
In addition to the new 25% levy on import vehicles, another sector-specific tariff on steel and aluminum that took effect on March 12 is expected to add about $300-$500 to new vehicle prices and another automobile industry-specific levy is waiting in the wings. Pending any changes, a new 25% trade tariff on automobile parts sources from outside the U.S., set to begin on May 3, is likely to lead to further price increases as manufacturers pass off higher building costs to new vehicle buyers.
At one Salt Lake City dealership, prices, for now, are about where they were before the new tariffs went into effect and sales have been brisk.
Chris Hudson, general manager for Mark Miller Subaru, said Subaru has a price pause in place through May but noted the industry is fraught with uncertainty amid fast changing tariff policy.
“It’s super volatile right now and the news is changing by the minute,” Hudson said. “As a business, we’re just trying to figure out what the future looks like. But, at this point, it’s hard to predict where things are headed.”
As far as timing goes, Hudson said that “right now is the best time to buy a car” and gave a couple of reasons to back it up.
He noted that prices at his dealership haven’t been artificially escalated and inventories remain robust. It’s also a great time to get the most out of trade-in vehicles. Hudson said the used car market is already responding to anticipated price changes in the new vehicle arena and trade-in values are up.
“Today, you might get $2,000 more than you would have just a few weeks ago,” Hudson said. And with current prices and selection, “you can get the best of both worlds.”