The COVID-19 pandemic had a profound impact on the automotive industry, leading to a significant upswing in car prices. Now, experts are warning consumers to prepare for another price hike, this time spurred by a new tariff on auto imports.
Starting April 2, President Donald Trump plans to impose a 25% tariff on imported passenger vehicles, light trucks, and some auto parts. This move is expected to affect not only foreign automakers but also American companies that rely on imported parts.
According to Ivan Drury, director of insights at Edmunds, “You’re going to see price increases… It’s such a shotgun approach. Virtually nothing goes unscathed.” Drury predicts that price hikes will vary, with some companies passing the increased costs directly to consumers, while others may absorb the costs to remain competitive.
The tariffs are expected to have far-reaching consequences, affecting new and used car prices, maintenance costs, and even insurance premiums. Cars assembled in the US won’t be exempt from the tariffs, as they rely on imported parts. “There is no vehicle that is 100% American in that regard,” Drury noted.
Wedbush Securities analyst Daniel Ives estimates that the tariffs could increase the average car price by $5,000 to $10,000, depending on the make and model. Ives warns that the tariffs “would be a hurricane-like headwind to foreign (and many US) automakers.”
While the tariffs may encourage increased investment in US manufacturing and a more resilient auto industry in the long term, consumers will likely feel the pinch in the short term. As Jessica Caldwell, Edmunds’ head of insights, notes, “For consumers navigating higher prices in the short term, the promise of future gains may feel distant — at least for now.”
The tariffs come at a time when car prices are already high. According to Kelley Blue Book, new vehicle prices have increased by about 25% since early 2020, with the average transaction price for a new vehicle exceeding $48,000 as of February. Higher interest rates have also pushed up auto loans, making new-vehicle affordability a challenge for many households.
