Car prices saw a dramatic upswing in the aftermath of the pandemic. Now, experts are warning consumers to prepare for more price increases spurred by a new tariff on auto imports.
Starting April 2, President Donald Trump is set to impose a 25% tariff on imported passenger vehicles, light trucks and some auto parts. For imported cars protected by the United States-Mexico-Canada Agreement, only the foreign parts that make up the vehicle will be subject to the tariff.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth,” Trump said inside the Oval Office. He said the tariffs will "spur growth like you haven’t seen before.”
The move follows a temporary tariff exemption granted earlier this month at the behest of three large U.S. automakers. After the monthlong reprieve, auto experts say higher prices are likely on the horizon.
"You're going to see price increases," said Ivan Drury, director of insights at automotive research site Edmunds. "It's such a shotgun approach. Virtually nothing goes unscathed."
What auto tariffs mean for consumers
In a sales forecast call Wednesday, Cox Automotive chief economist Jonathan Smoke said massive increases in tariffs would be “highly disruptive” to North American vehicle production and could lead to tighter supply and higher prices.
“By mid-April, we expect disruptions,” Smoke said. “We expect sales to fall, new and used prices to increase, and some models to be eliminated if those tariffs persist.”
Drury said price increases will probably vary. Some companies may pass price hikes from the 25% tariff directly to consumers, while others may bear some of the costs to remain competitive and ease cost pressures in other ways, such as reducing incentives.
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But with the tariff expected to hit both imported vehicles and key auto parts like engines and transmissions, Drury said consumers can expect price increases "across the board." That includes new cars, used cars, maintenance costs and even insurance premiums, because accidents involving new parts would be more costly.
Cars assembled in the U.S. wouldn't be safe from tariffs either, Drury said, because they import parts from other countries.
"There is no vehicle that is 100% American in that regard," Drury said. Used vehicles will see "a bit more lag time, but there will be an effect."
Wedbush Securities analyst Daniel Ives said questions remain on exactly how these tariffs will be applied or whether they will be altered in the coming weeks. In their current form, he estimates they could push up the average car price $5,000 to $10,000, depending on the make and model.