Trump announces 25% auto tariffs. What it means for car buyers
Should you buy a car before auto tariffs go into effect?
President Donald Trump has announced a 25% tariff on imported cars and key auto parts. Here’s what it means for consumers and automakers.
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.”
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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.
The tariffs “would be a hurricane-like headwind to foreign (and many US) automakers,” Ives said in a note Wednesday. But “we continue to believe this is some form of negotiation and these tariffs could change.”
If tariffs do hold, they could encourage increased investment in U.S. manufacturing and a more resilient auto industry, according to a note from Jessica Caldwell, Edmunds’ head of insights. But those potential long-term benefits will take time.
“For consumers navigating higher prices in the short term, the promise of future gains may feel distant − at least for now,” Caldwell said.
How much does a new car cost today?
The tariffs come shortly after pandemic-era supply chain disruptions pushed up car prices for U.S. drivers. New vehicle prices are up about 25% since early 2020, according to Kelley Blue Book, with the average transaction price for a new vehicle just above $48,000 as of February.
Meanwhile, higher interest rates have pushed up auto loans, which makes affording a new vehicle “a real challenge for most households,” Erin Keating, executive analyst for Cox Automotive, said in a statement this month.
Another report from AAA found the cost the total cost to own and operate a new vehicle was roughly $1,025 a month in 2024, including expenses like maintenance, fuel, insurance, financing and depreciation. That’s up more than $200 a month from 2021.
(This story was updated to add new information.)
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