25% tariffs on imported cars: Prices Set to Rise

25% tariffs on imported cars will take effect on April 3, 2025, likely driving up new car prices across the U.S. President Trump made the announcement on March 26. Automakers and customers are bracing for the financial consequences.

Impact on Car Prices and Supply Chain Price Increases: Price rises are expected because imports account for more than half of U.S. auto sales.

Parts Supply Chain: Even cars built in the United States depend heavily on imported parts. Parts used in Stellantis, Ford, and General Motors models will be subject to the tax.

Market Reactions: Automaker shares dropped as markets reacted to the uncertainty.

The intricacy of implementing tariffs

The entire 25% rise won’t be applied to all imported cars. Cars manufactured in Canada or Mexico with parts from the United States, for example, might only be subject to partial tariffs. Instead of a complete 25% price increase, models such as the Honda Civic and Toyota Tacoma may face smaller price increases.

Industry and Labor Reaction

In anticipation of more domestic jobs, United Auto Workers (UAW) President Shawn Fain praised the tariffs. But it will take time for the manufacturing infrastructure to adapt.In the short run, the tariffs may impede R&D spending and innovation.

Potential Trade Retaliation

Countries including the EU, Canada, the UK, and Mexico have already pledged to impose retaliatory duties on U.S. products. Reciprocal acts could further affect the global auto sector.

What Happens Next?

Although the tariffs are set to go into force on April 3, the market is still uncertain. The White House has already paused tariffs to allow for potential policy revisions. For the time being, buyers should expect limited inventory and higher new car prices.

Source: Car And Driver