On Wednesday, President Trump issued a one-month delay for U.S. automakers on tariffs placed on imports from Canada and Mexico, trading partners that provide many of the car makers’ vehicle parts and components. If the 25% levies are enacted, auto manufacturers will face higher costs, and are likely to pass on some of those price hikes to consumers, key industry players say.
The upshot, according to experts, is that consumers who are thinking of buying a car in the next year may want to consider buying a car sooner in 2025 rather than later. If the tariffs go into effect, car prices could rise by between $2,000 and $12,200 for some models, according to a recent estimate from Anderson Economic Group (AEG), a Michigan-based economic consultancy.
“These are cost increases that cannot be hidden from the consumer. Substantial portions, or perhaps all of it will be passed along to consumers, or manufacturers will stop producing them,” AEG CEO Patrick Anderson told CBS MoneyWatch.
The timing of the tariffs remain uncertain, and it’s possible that Mr. Trump could again delay the import duties. And even if the tariffs go back into effect in April, it’s unclear how long they might remain in place, which adds to the uncertainty surrounding the import duties, according to Morningstar equity strategist David Whiston in a March 5 research note.
Spreading the costs
While certain models source a greater share of components from Canada and Mexico than others, manufacturers are expected to spread any added costs they incur across their lineups.
“If the tariffs are here, and permanent, by the time we get to summer, we’d expect to see higher prices everywhere,” Tyson Jominy, vice president of analytics at J.D. Power, told CBS MoneyWatch.
That means that even U.S.-sourced and assembled vehicles with components that aren’t subject to tariffs could see moderate price hikes.
“If we are talking about 25% tariffs on Mexico and Canada, prices will go up, and we are expecting most automakers to peanut-butter spread the impact across their entire portfolio, even if the vehicle is built in the U.S.,” Jominy explained. “The reality is that every automaker, regardless of where they final assemble, is likely to be affected if these parts tariffs go into effect.”
Automakers are likely to be strategic about how they implement price hikes in order to mitigate the affect on sales, experts say.
“Automakers will smooth costs out across their vehicle lineups,” Edmunds head of insights Jessica Caldwell told CBS MoneyWatch. “They won’t increase one model’s price by 40%. They’ll figure out ways to spread out the costs in a way that doesn’t harm profitability as much, and doesn’t kill sales at the same time.”
When will price hikes take effect?
The car buying process is often lengthy, requiring months of research before new buyers can drive their purchase off the lot.
While prices won’t skyrocket overnight if tariffs go into effect, they could start to rise by summer, industry analysts say. Because of that, car buyers should start looking now, they added.
Manufacturers with more inventory in stock could push off price hikes for some time, whereas those that are running low could be forced to incorporate them into sales prices earlier. Jominy said the range could be a few weeks to “many months” from the time tariffs take effect.
“If you think you’ll need a car within the next several months, you should probably get into the market sooner rather than later,” Jominy said.
He’s not encouraging consumers to make impulse purchases, though.”But if you’re planning to be in market the first half of year, it probably makes sense to speed up what you can and make sure you’re ready to go,” he said.
What about the used car market?
When new vehicle prices rise, some buyers turn to the used car market for better deals, which can in turn drive up used car prices.
“If something comes to pass on tariffs, we’d expected higher prices on both new and used vehicles,” Jominy said.
Demand for cars — and other products impacted by tariffs — may be pulled forward, experts say. “Because we don’t know what’s doing to happen, I would be buying everything that I needed that’s an appliance that could have content coming from Canada or Mexico,” Barry Appleton, co-director of the Center for International Law at New York Law school told CBS MoneyWatch.
“It’s a little bit like eating your lunch at recess. You get the same amount of food, you just get it earlier,” he added.
Because Mr. Trump has flip-flopped on tariffs more than once already, it’s unclear if and when auto tariffs will hit. But Robert Handfield, professor of supply chain management at North Carolina State University, said for the risk-averse, buying an automobile now versus later in the year is a wise move.
“He postponed the tariffs for a month to give automakers a little breathing room,” he said. “I think it’s a good idea to buy now — you’d be able to get in under the wire and save around $4,000 for a regular sedan or up to $10,000 to $12,000 for a truck, which are significant savings.”
Even if the tariffs never come to fruition, consumers wishing to play it safe can’t go wrong by making purchases now, according to Edmunds’ Caldwell.
“Some people don’t have the finances to get it wrong. We are stretched thin financially as country and new vehicle prices aren’t cheap, so I can see a lot of people don’t want to take the risk,” she said. “Sure, it might not happen. But what if it does? Now you’re paying how much more that you can’t afford.”
Tariffs, Trump Administration, Automakers
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