Trump's tariff policy will increase U.S. car prices by thousands
Experts caution that Trump's tariff policies may lead to significant repercussions for the U.S. automotive sector, resulting in increased car prices and placing additional strain on consumers.
TroibNews 
Since reclaiming the presidency on January 20, U.S. President Donald Trump has reshaped the global landscape with his audacious and often controversial domestic and foreign policies. A central element of his agenda has been the implementation of tariffs, which has generated significant concern in the U.S. and internationally. Experts particularly warn that his tariff policies could inflict serious harm on the U.S. automotive industry, potentially raising car prices and placing a burden on consumers.
In less than a month after taking office, Trump initiated three significant tariff actions. His first round targeted Canada, Mexico, and China, imposing tariffs of 25 percent and 10 percent, respectively, on imports from these nations. The tariffs on Canada and Mexico were subsequently delayed by a month. The second round introduced a 25 percent tariff on imported steel and aluminum, affecting countries including Canada, Mexico, Brazil, South Korea, Vietnam, the UK, and members of the European Union. The third round, termed "reciprocal tariffs," applies to all nations.
Trump has described tariffs as one of the "most beautiful words in the dictionary." Analysts suggest that his rationale for imposing tariffs is complex. On one side, the tariffs respond to trade conflicts, with the U.S. accusing foreign governments of subsidizing their domestic companies, discriminating against American firms, or maintaining significant and persistent trade surpluses with the U.S. Conversely, Trump has utilized tariffs as a political leverage tool, exemplified by the 25 percent tariffs on Canada and Mexico, highlighting the need to tackle fentanyl trafficking and immigration. Following agreements with both countries on border control and organized crime, Trump temporarily suspended the tariffs for at least 30 days.
Despite economists' warnings that tariffs ultimately burden U.S. consumers through increased prices, Trump's policies show little indication of change. Experts believe that the costs of tariffs will primarily fall on American consumers, especially in sectors like automobiles, where the U.S. lacks the capability to produce some products domestically.
The automotive sector, a crucial part of the U.S. economy, is particularly exposed. Industry insiders have cautioned that U.S. car manufacturers will suffer the most from these tariffs, which will inflate the cost of auto parts and further drive up car prices in the U.S.
Market research indicates that if Trump's proposed tariffs are enacted, U.S. car buyers could encounter price increases of several thousand dollars. According to Cox Automotive, the average transaction price for new cars is already $49,740, nearing the $50,000 mark.
Benchmark analyst Cody Acree predicts that if the proposed 25 percent tariffs on cars and parts from Mexico and Canada are implemented, the average price of a car in the U.S. could rise by approximately $5,790. This increase would elevate the average cost of a new car to over $54,500, reflecting a nearly 12 percent hike from 2024.
Acree wrote in a note to clients, "We believe the Auto sector is the most exposed to the risks of increased tariffs, given its sheer size of trade dollars, the complexity of the intertwined supply and manufacturing channel that has been cultivated over decades, and the sheer number of our companies that participate in support of this key consumer industry."
Benchmark's estimates reveal that over 22 percent of the vehicles sold in the U.S. last year originated from Mexico and Canada. Moreover, around 40 percent of the components used in U.S. cars are sourced from these two countries.
In 2024, Mexico and Canada exported over $200 billion worth of vehicles and auto parts to the U.S. Specifically, Mexico provided $95 billion in vehicles and $68 billion in parts, while Canada contributed over $36 billion in vehicles and nearly $16 billion in parts.
Analysts at Wolfe Research also foresee a rise in car prices, but have offered a different estimate, predicting an average increase of $3,000 due to tariffs.
During a recent industry event, Ford CEO Jim Farley voiced concerns regarding Trump's proposed tariffs on Canada and Mexico, in addition to the 25 percent tariffs on steel and aluminum imports.
"President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation in the U.S...., So far what we're seeing is a lot of cost, and a lot of chaos," Farley stated at the Wolfe Research investment conference.
He highlighted that Canada and Mexico are vital trade partners for the U.S. and crucial suppliers of parts for Ford. Implementing tariffs on these countries could put U.S. car manufacturers at a competitive disadvantage compared to automakers from Japan, South Korea, and Europe.
The U.S. stands as the world's largest importer of goods, with Mexico, Canada, China, Germany, and Japan being the five leading suppliers. Automobiles are not the only products causing rising costs for Americans.
According to the National Retail Federation, the tariffs proposed by Trump are anticipated to lead to an increase in consumer spending of between $46 billion and $78 billion annually across various categories, including clothing, toys, furniture, household appliances, footwear, and travel goods.
Olivia Brown contributed to this report for TROIB News
In less than a month after taking office, Trump initiated three significant tariff actions. His first round targeted Canada, Mexico, and China, imposing tariffs of 25 percent and 10 percent, respectively, on imports from these nations. The tariffs on Canada and Mexico were subsequently delayed by a month. The second round introduced a 25 percent tariff on imported steel and aluminum, affecting countries including Canada, Mexico, Brazil, South Korea, Vietnam, the UK, and members of the European Union. The third round, termed "reciprocal tariffs," applies to all nations.
Trump has described tariffs as one of the "most beautiful words in the dictionary." Analysts suggest that his rationale for imposing tariffs is complex. On one side, the tariffs respond to trade conflicts, with the U.S. accusing foreign governments of subsidizing their domestic companies, discriminating against American firms, or maintaining significant and persistent trade surpluses with the U.S. Conversely, Trump has utilized tariffs as a political leverage tool, exemplified by the 25 percent tariffs on Canada and Mexico, highlighting the need to tackle fentanyl trafficking and immigration. Following agreements with both countries on border control and organized crime, Trump temporarily suspended the tariffs for at least 30 days.
Despite economists' warnings that tariffs ultimately burden U.S. consumers through increased prices, Trump's policies show little indication of change. Experts believe that the costs of tariffs will primarily fall on American consumers, especially in sectors like automobiles, where the U.S. lacks the capability to produce some products domestically.
The automotive sector, a crucial part of the U.S. economy, is particularly exposed. Industry insiders have cautioned that U.S. car manufacturers will suffer the most from these tariffs, which will inflate the cost of auto parts and further drive up car prices in the U.S.
Market research indicates that if Trump's proposed tariffs are enacted, U.S. car buyers could encounter price increases of several thousand dollars. According to Cox Automotive, the average transaction price for new cars is already $49,740, nearing the $50,000 mark.
Benchmark analyst Cody Acree predicts that if the proposed 25 percent tariffs on cars and parts from Mexico and Canada are implemented, the average price of a car in the U.S. could rise by approximately $5,790. This increase would elevate the average cost of a new car to over $54,500, reflecting a nearly 12 percent hike from 2024.
Acree wrote in a note to clients, "We believe the Auto sector is the most exposed to the risks of increased tariffs, given its sheer size of trade dollars, the complexity of the intertwined supply and manufacturing channel that has been cultivated over decades, and the sheer number of our companies that participate in support of this key consumer industry."
Benchmark's estimates reveal that over 22 percent of the vehicles sold in the U.S. last year originated from Mexico and Canada. Moreover, around 40 percent of the components used in U.S. cars are sourced from these two countries.
In 2024, Mexico and Canada exported over $200 billion worth of vehicles and auto parts to the U.S. Specifically, Mexico provided $95 billion in vehicles and $68 billion in parts, while Canada contributed over $36 billion in vehicles and nearly $16 billion in parts.
Analysts at Wolfe Research also foresee a rise in car prices, but have offered a different estimate, predicting an average increase of $3,000 due to tariffs.
During a recent industry event, Ford CEO Jim Farley voiced concerns regarding Trump's proposed tariffs on Canada and Mexico, in addition to the 25 percent tariffs on steel and aluminum imports.
"President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation in the U.S...., So far what we're seeing is a lot of cost, and a lot of chaos," Farley stated at the Wolfe Research investment conference.
He highlighted that Canada and Mexico are vital trade partners for the U.S. and crucial suppliers of parts for Ford. Implementing tariffs on these countries could put U.S. car manufacturers at a competitive disadvantage compared to automakers from Japan, South Korea, and Europe.
The U.S. stands as the world's largest importer of goods, with Mexico, Canada, China, Germany, and Japan being the five leading suppliers. Automobiles are not the only products causing rising costs for Americans.
According to the National Retail Federation, the tariffs proposed by Trump are anticipated to lead to an increase in consumer spending of between $46 billion and $78 billion annually across various categories, including clothing, toys, furniture, household appliances, footwear, and travel goods.
Olivia Brown contributed to this report for TROIB News
