Car costs, which have already spiked 20 percent since the pandemic, are expected to get another jolt in coming weeks, with the Trump administration’s newest proposed tariffs likely to add thousands of dollars to manufacturers’ sticker prices.
President Donald Trump on Wednesday announced 25 percent tariffs on imported vehicles and auto parts beginning April 3, a move meant to “protect America’s automobile industry” by encouraging more domestic production. About half of the cars sold in the United States last year were imported, and virtually all vehicles sold contained some foreign-made parts.
It’s unclear exactly how and when prices will start ticking up, but analysts say brands such as Lexus, Toyota, Honda and Subaru are likely to be among the first to face higher costs because they have the smallest stockpiles of cars already in the United States.
“We’re going to start seeing prices rise almost immediately,” said Charlie Chesbrough, senior economist at Cox Automotive, who expects an average markup of $6,000 per car. “Some of the most affordable vehicles — compact SUVs, for example — are made outside the country, so they’re going to be the most vulnerable.”
In addition to lifting car prices, economists say the new tariffs will stifle global production and cut into U.S. economic growth at a time when there are already signs of strain. Consumers, who account for roughly 70 percent of the country’s economy, are beginning to pull back in the face of high costs and elevated interest rates. Further price increases could put a freeze on the sale of motor vehicles and parts, which accounted for about 20 percent of the economy’s growth in late 2024.
“You take a $40,000 car — now it’s a $45,000 or $50,000 car,” said John Luciano, owner of Street Volkswagen, a dealership in Amarillo, Texas, where roughly 80 percent of cars come from overseas. “There is no way around it, these tariffs are going to be brutal.”
Most immediately, carmakers are rolling back national discounts and incentive programs to account for higher import costs. But industry analysts say it could take weeks, if not months, to figure out exactly how much more manufacturers, dealers and shoppers will have to pay. Extra costs are likely to vary from car to car, depending on how much of the automobile is imported and from where.
“Even if you’re thinking, ‘I’ll just go buy the most American car I can think of — a Ford F-150,’ it’s really not that simple,” said Joseph Yoon, consumer insights analyst at the automotive research site Edmunds. “Half the parts on that truck are from Canada or Mexico.”
For car dealers, the sudden specter of new tariffs after months of on-again, off-again negotiations has introduced a new level of uncertainty. Many are waiting to hear from manufacturers and unsure what to relay to worried buyers, who are increasingly jittery about rising costs. Fresh data Friday showed that Americans expect inflation to rev up to 4.1 percent in the next five years, the highest forecast in 32 years, according to a closely watched survey from the University of Michigan. Overall consumer sentiment fell, too, for the third straight month.
At Glassman Automotive Group in Southfield, Michigan, customers have been calling nonstop this week, asking how they can lock in a new purchase or lease before tariffs take hold. Increasingly, customers have also been taking out 84-month car loans, spreading car payments over seven years instead of the customary three, as a way to offset rising costs and interest rates, said George Glassman, the automotive group’s president. An additional spike in prices, he said, would push car buying further out of reach for many.
“It’s going to affect all the brands I sell — Hyundai, Kia, Subaru,” said Glassman, who employs about 120 people. “No one really knows just yet whether this means you’ll be $2,000 or $3,000 or $7,000 more for a car, but it’s going to create an incredible disruption to the overall industry.”
Glassman has about two months’ worth of inventory at his dealership — enough to shield him from any immediate fallout next week but not to make up for higher costs in the long run. He’s also worried that people might stop buying cars altogether, if economic anxiety and higher costs get the best of them.
“There’s a sense of, ‘Oh, it’s just a car,’ but for a lot of people, it’s the second-biggest expense after housing, and it’s how they get to work,” said Yoon. “Car prices are already the highest they’ve ever been, and now you slap a 25 percent tariff on them — that means customers will stop buying. It’ll be a hit to the economy.”
Car prices began spiking in early 2021, as pandemic-related glitches and supply shortages pushed up the cost of key parts and labor. By late 2022, the average cost of a car had risen 21 percent to more than $49,900, according to data from Cox Automotive. Prices have steadied since then but remain near record highs.
The Trump administration on Wednesday said covid-era hiccups have made it difficult for U.S. carmakers to “maintain a resilient domestic industrial base.” They have faced supply chain shocks and labor shortages, while foreign automakers, “propelled by unfair subsidies and aggressive industrial policies, have grown substantially,” the White House said. The new tariffs, it said, would be a step toward rebuilding the U.S. auto-manufacturing industry.
On Truth Social, Trump said his efforts were “protecting and bringing back American auto jobs,” citing a recent $20 billion investment by South Korea’s Hyundai, as well as Jeep maker Stellantis’s $5 billion commitment to U.S. manufacturing. But economists note that it is likely to take years before those new plants are up and running.
“One of the main goals of the tariffs is to reshore production, to bring manufacturing back from overseas,” said Abby Samp, an industry economist at Oxford Economics. “There’s probably some scope for that, but it is going to involve a significant amount of investment, and it will raise costs for U.S. manufacturers and households.”
Bob Henig, who owns a BMW and Ducati motorcycle dealership in Jessup, Maryland, says he’s been losing sleep over new tariffs. He isn’t sure whether motorcycles will be included in the White House’s latest measures or how much higher costs could go.
“When I wake up at 5 a.m., this is what’s on my mind,” he said. “Right now we’re just sort of tapping our fingers, wondering how this is going to play out.”
Henig started the year with extra inventory, but he says stocking up has been tricky, too. Borrowing costs, at about 6 percent, are relatively high, and he isn’t sure whether demand will hold up.
“It’s a very delicate balance: You can wipe out your profit for the entire year because you had too many of this model or of this color,” he said. “We have to be careful we’re not drowning in excess inventory, especially if people start saying, ‘You know, with everything going on, I’m not going to buy a new vehicle this year.’”
