Car prices expected to increase by as much as $12,000 thanks to Trump’s tariffs
Source: The Verge
Car prices are already at record highs, and President Donald Trump’s tariffs — if they stay in place — could send them into the stratosphere. The situation remains extremely fluid, with Trump administration officials today announcing a one-month reprieve for the auto industry, according to Politico.
But if tariffs stay in place, sticker prices could skyrocket by as much as $12,000, according to one analysis. Dealerships could be stuck with a bunch of trucks and SUVs that no one can afford. Some models could vanish from showrooms altogether. Many of these changes won’t take effect right away, as dealerships work through their vehicle stock. But the net impact could still be devastating.
After an initial delay, Trump earlier this week imposed 25 percent tariffs on imports from Canada and Mexico as well as an additional 10 percent tariff on goods from China. Around 5.3 million vehicles are built in Canada and Mexico, 70 percent of which are destined for the United States.
Automakers have warned about catastrophic effects on the industry if Trump’s tariffs remain in place. Ford CEO Jim Farley put the matter plainly at an investor conference last month: “Let’s be real honest,” Farley said, “Long term, a 25 percent tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen.”
“Long term, a 25 percent tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen.”
That could include a historic decrease in vehicle production in the US, Canada, and Mexico — possibly as much as a third of the vehicle output in all three countries. Current production for North America is about 63,900 vehicles a day: 41,700 in the US; 17,600 in Mexico; and 4,600 in Canada. Production on some models, like the popular Toyota RAV4, which is made in Canada, could halt altogether, S&P Global Mobility said during a webinar this week. It’s unlikely that Toyota will find space at its US assembly plants to replace that production.
Vehicle prices are already hitting historic highs, with average transactions for new vehicles clocking in at $48,118 in January, according to Edmunds.
The threat of tariffs didn’t really move the needle last month, but it still has the potential to impact the cost of new vehicles now that they’re in effect. With these tariffs — plus the 25 percent tariff proposed on the EU and a cumulative 20 percent increase on Chinese-made vehicles — the average list price of new vehicles in the US could increase by over 7 percent, from $49,800 to $52,500, according to CarGurus.
Top-selling models, including the Toyota Tacoma, Chevrolet Equinox, Toyota RAV4, Chevrolet Silverado 1500, and Honda HR-V, could all see major price increases. But the effects won’t be felt for at least several months thanks to healthy inventory levels, up 12 percent year over year.
The average list price of new vehicles in the US could increase by over 7 percent, from $49,800 to $52,500
Other analysts sifted through component costs for specific US-made vehicle models to see how tariffs could even impact domestically assembled vehicles. Anderson Economic Group concluded that the tariffs could boost manufacturing costs by $4,000 to more than $10,000 per car, depending on the vehicle model. Battery-electric crossover SUVs could see the biggest spike of $12,000, according to the group’s deep dive.
Automakers have had months to prepare for the tariffs, but given the complex nature of supply chains, it’s unclear that any of them will be able to avoid passing cost increases along to consumers. The investment bank Jefferies predicted prices would go up by about 6 percent on average, or $2,700, while two analyses cited by Kelley Blue Book agreed on a $3,000 average price bump.
Auto dealers, many of them Trump supporters, are left to reckon with the repercussions of the president’s trade war. In a recent interview with Fox, a Philadelphia-based Ram dealer called the tariffs “traumatic.” He recounted the experience of a customer who ordered a $80,000 truck, only to abandon the purchase after the price went up by $20,000.
“It’s going to sit on my lot, and you know the higher interest rates we’re paying right now for floorplan, and nobody’s gonna buy the truck because it just had a $20,000 price increase,” Ram dealer David Kelleher told the outlet.
