Though only a week has gone by since President Trump moved forward with 25% tariffs on imported cars, the lack of clarity on how the tariffs will be implemented has auto makers, mechanics, industry experts and consumers feeling uneasy about the future.
Trump recently initiated a 90-day pause on most of his global tariffs, but those levied against Canada and Mexico reportedly remain in effect.
The current tariffs on imported cars will be expanded in May to include imported car parts. With the cost of steel and aluminum from Canada also set to rise with additional tariffs on those imports, many mechanics are worried about the future for their customers, and how higher prices will impact their businesses.
In an interview with CBS News, Jay Gottfred, third-generation owner of the Erie-LaSalle Body Shop, noted that the future is full of uncertainty for the industry and consumers.
"I know parts will be going up. I'm not sure to what degree yet. A lot of unknowns here,” said Gottfred.
"The cost of repair is going to go up, which means the premiums are going to probably start going up for the consumers as well. So, obviously, it's a snowball effect for all these things."
The import tax on cars has already had a major impact on the auto industry across North America.
The automaker Stellantis has already halted production at plants in Mexico and Canada, and has announced further temporary layoffs at factories in Michigan and Indiana. Stellantis manufactures a number of popular U.S. brands, including Jeep, Dodge and Chrysler.
Stellantis COO Antonio Filosa said in an email to employees that the layoffs and production pauses "are necessary given the current market dynamics." However, the Trump administration maintains that tariffs on foreign imports will boost the American economy and increase the manufacture of domestic vehicles.
Critics and industry analysts, however, aren’t so sure. S&P Global Mobility automotive analyst Stephanie Brinley reported that tariffs will not bring manufacturing jobs back to the U.S. overnight.
“There is no quick solution, and increasing manufacturing in the U.S., particularly based on an artificial economic condition, will be costly and is likely to create a more expensive manufacturing environment,” Brinley shared in an article on S&P Global's website.
“Retaliatory actions are just beginning to surface; those actions will add another layer of complexity to the situation.”
Auto industry experts also note that the industry in North America has a highly-integrated supply chain, and it may be nearly impossible to accurately label both finished cars and auto parts as imports vs. domestic products.
Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association, has been sounding the alarm for months on tariffs, warning that the manufacture of parts is dependent on cooperation across borders, and that the industry could shut down or collapse without it.
In an interview with the CBC, Jeff Rightmer — an automotive supply chain expert at Wayne State University in Detroit — said, "The problem becomes, you have certain parts that could go back and forth across the border seven or eight times" before a vehicle's final assembly. “Is that tariff going to be applied each time it comes back and forth?”
"Those are the things that really start to make this whole thing complicated.”
While White House officials maintain that foreign companies will be responsible for the costs of tariffs, the National Bureau of Economic Research reported that in Trump's first term, added costs were mostly passed on to American businesses and consumers.
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American auto analyst Mel Yu shared in an interview with Reuters that even domestic cars rely heavily on imports. "No matter where they are made, car prices will go up," she said. "The impact of the parts tariffs will be pretty quick."
Imported car parts make up as much as 80% of cars that are manufactured in the U.S. These parts also account for up to 40% of the retail price.
In anticipation of the jacked-up prices, some drivers have been rushing to the dealerships. But what can you do if prices do rise before you have the chance to buy?
One option is to explore discounts and rebates. American manufacturers and dealerships occasionally offer discounts that can lower the price of a new car purchase.
Special lease rates, low-interest financing and flat-cash discounts are among the incentives that car buyers can explore. However, these offers are often time-sensitive, which means car buyers need to be diligent and try to take advantage of these promotions before they expire.
In an article from Consumer Reports, auto experts Keith Barry and Jeff S. Bartlett recommended hanging onto your existing car for as long as possible and keeping it well maintained.
“Consider finding a trusted independent repair shop, rather than going to your local dealership. Our survey results show that consumers are more satisfied with the cost of getting a repair at an independent shop. They may have more expertise at fixing older cars as well.”
Consumer Reports notes that staying on top of maintenance and repairs will help prevent large bills from your mechanic down the road. What’s more, your car might be worth more once the effects of the tariffs kick in.
Jake Fisher, senior director of Consumer Reports’s Auto Test Center, said, “If new car prices go up, your used car will be worth more.”
“We saw this happen during the early days of the COVID-19 pandemic, when sellers got record-high prices for their used cars,” said Barry and Bartlett. “If you get more for trading in or selling your used car, it could help offset tariff-related price increases on the next car you purchase.”
No matter what, it pays to find a mechanic you trust and to set a strict budget if you’re in the market for a new car. Moreover, shopping around for a better deal on your insurance can help you find some additional wiggle room in your budget that you can set aside to cover future repairs and maintenance.
Speaking of setting money aside, if you don’t have an emergency fund set up, now might be the time to get one started. Life happens, and surprise expenditures such as emergency car repairs can pop up at any time. And since the cost of car repairs is likely to rise in the near future, an emergency fund can potentially keep you from using credit cards and taking on debt.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
