The new car tariffs introduced by U.S. President Donald Trump are set to take effect in April and May, sparking concerns among American consumers about potential price increases for imported cars. Some people have rushed to car dealerships to make purchases, fearing that prices may rise. However, experts caution that while it’s understandable to feel anxious about buying a car before the tariffs kick in, consumers may not necessarily find the best deals during this time.
Since 2019, prices of both new and used cars in the U.S. market have been steadily escalating. The upcoming imposition of tariffs on car imports is adding further pressure to an already challenging market. Some experts believe that price hikes in the automotive sector are inevitable, while others advise consumers to approach car purchases with greater caution at this time.
Industry observers in the automotive market have emphasized that consumers worried about price increases should not make purchasing decisions based solely on emotions. According to Karl Brauer, an executive analyst at car search engine and price comparison platform iSeeCars.com, manufacturers and dealers are promoting the possibility of price hikes to boost short-term sales.
Brauer highlighted that uncertainty remains regarding how the tariffs will affect future pricing strategies. While future price increases are a possibility, they are not guaranteed. Therefore, buyers should not rush into purchasing decisions out of fear or alarm.
Charles Benoit, a trade advisor at the Coalition for a Prosperous America in Washington, D.C., predicts that successful implementation of the new tariff policies could lead to a resurgence of manufacturing in the U.S., eventually lowering car prices by increasing production capacity.
Recent sales data indicates that consumers are still wary of the potential impact of the 25% tariff on whole cars announced in April. Cox Automotive’s Chief Economist Jonathan Smoke shared data showing a 22% increase in new car sales in the first week of April compared to the same period in 2024, with a 12% increase in used car sales.
Smoke suggested that the surge in sales could be motivated by consumers trying to avoid price hikes resulting from tariffs. The data from Cox Automotive also revealed a decrease in new and used car supply nationwide due to increased purchases.
American President Donald Trump stated on April 2 at the White House that imposing car tariffs was necessary to protect U.S. interests against certain foreign actions that threatened national security by undermining the country’s industrial base.
Amid delays in targeted retaliatory tariffs against specific countries, signals from Trump and his administration indicate willingness to negotiate better bilateral trade agreements and other concessions. On April 23, White House officials confirmed to the Epoch Times that the administration is considering the possibility of tariff exemptions for certain car manufacturers, but specific details of these policy shifts were not disclosed.
Benoit noted that the actions taken by Trump’s administration were not surprising, as a similar tariff on whole cars was proposed in 2019 during Trump’s first term. Import cars currently hold more than half of the U.S. automotive market, reflecting a longstanding trend of increasing imports compared to minimal purchases of American cars by other countries. Benoit added that the current capacity utilization in U.S. car factories is below 60%.
Analyzing sales data from the renowned automotive magazine Car and Driver based in Michigan, out of the top 25 selling cars in the U.S. in 2024, only six were American-made models. Benoit projected that successful tariff policies could lead to a reduction in domestic consumption prices.
He explained that the tariffs have already prompted adjustments by foreign car companies, such as Honda’s decision on April 16 to produce their Civic hybrid model exclusively in Indiana, rather than in Japan and the U.S. as previously planned. Similarly, Stellantis, a multinational auto manufacturer headquartered in the Netherlands, announced on April 4 that its factories in Mexico and Canada would temporarily shut down to assess tariff impacts. The company also revealed temporary layoffs of 900 employees in Michigan and Indiana.
Brauer highlighted that while increasing production shifts at American factories could quickly boost output, significant adjustments to fully counter the effects of the new tariff plans might take years to complete.
In the short term, both Brauer and Cox Automotive’s Industry Insights Director Stephanie Valdez Streaty anticipate significant cost increases for both new and used cars due to the tariffs. Apart from direct pricing pressures from whole car tariffs, levying tariffs on foreign-manufactured components could raise production costs. Brauer noted that the majority of U.S. cars are manufactured using foreign parts.
In an April 7 speech, Smoke predicted that following an initial surge in demand (as currently observed), manufacturers and dealers would gradually reduce incentives on imported new car sales, lessen discounts, and stabilize prices. He expects a 30% production decline once component tariffs take effect in May.
Looking ahead, Smoke projected reduced production and delivery volume for imported cars in the long term, with some models potentially being phased out entirely. This overall supply reduction would lead to price increases across all cars.
Streaty informed the Epoch Times that car costs could rise by an average of 11%, with consumers planning to buy cars under $30,000 facing the most significant price pressure due to the new tariffs.
For most Americans, rising car prices spell bad news. Since 2019, car price increases have outpaced overall consumer price inflation rates and median household income growth.
Brauer termed the current economic situation for American consumers as “extremely challenging.” Comparatively, in 2019, $20,000 could have bought about half of the used cars available in the U.S., while now, only about 10% of used cars are priced below $20,000.
On the other hand, total costs over a car’s lifespan have been on the rise. Streaty highlighted nearly a 20% increase in car insurance costs over the past year, with vehicle maintenance and repair expenses soaring over 30% since 2020.
Moreover, higher interest rates have inflated car purchase costs. Experian’s statistics revealed that in the fourth quarter of 2024, average new car loan rates stood at approximately 6.3%, while used car loan rates averaged 11.6%.
Brauer noted that Americans are now securing loans lasting up to eight years instead of the previously common five-year terms.
“Monthly payments ranging from $700 to $1,000 for a car loan are now more common than ever, which is staggering,” Brauer expressed the shift in economic affordability limits.