On Wednesday, April 2, President Trump announced that a 25% tariff will be imposed on all imported cars, effective on April 3. A 25% tariff will also be imposed on car components exported to the United States, effective before May 3. Many people are concerned that car prices will increase, leading to a rush to buy vehicles before the tariffs take effect.
Currently, car manufacturers with sufficient inventory have the advantage, while those with lower stock, such as Toyota, are facing price hike pressures.
According to data from Cox Automotive, as of March 17, Toyota’s inventory turnover days for cars stood at 32.7 days, significantly lower than the industry average of 89 days, indicating that Toyota’s stock is depleting faster than its competitors. The popular RAV4 model has an inventory turnover of only 20.9 days.
As the world’s largest car manufacturer, Toyota has stated that it currently has no plans to raise prices in the United States. Erin Keating, an analyst at Cox Automotive, mentioned that Toyota informed her they could increase production at their Kentucky plant, but from a purely financial perspective, the decision not to raise prices could be fragile.
SBI Securities automotive industry analyst Koji Endo predicts that Toyota “may gradually start raising prices from early May.”
“Their inventory is very limited… not even enough for a month of sales, all inventory will soon be sold out,” Endo said.
Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory, believes that the weak Japanese yen allows Toyota to delay price increases, giving them leverage to compete with American rivals such as General Motors, Ford, and Stellantis.
Cox Automotive identified five car models most impacted by the tariffs, with an average inventory turnover of 51 days. These include Honda CR-V, Chevrolet Trax, Subaru Forester, Chevrolet Equinox, and Honda HR-V.
According to data from Kelley Blue Book, following the COVID-19 pandemic, car prices have already experienced a surge. The average new car price in February was around $48,000, a 25% increase compared to five years ago.
Experts suggest that prices may rise once again. Art Wheaton, a labor research director at Cornell University and transportation industry expert, pointed out that the tariff impact could be significant and almost immediate.
The scope of this wave of car tariffs is extensive, covering not only imported cars and car parts but also automotive computers, affecting goods estimated to exceed $460 billion.
AEG estimates that for cars produced or assembled in the U.S., the tariffs could add an additional $2,500 to $5,000 for economy cars, $5,000 to $8,000 for midsize cars, and $10,000 to $15,000 for SUVs and luxury models.
For imported cars from Europe and Asia, tariffs on small car models could see an increase of $8,000 to $10,000, while luxury cars, SUVs, and sports cars could face tariff impacts of up to $20,000 or even higher.
AEG suggests that car manufacturers may initially absorb some of the tariff costs in the first year but ultimately shift production partially to the U.S. and potentially reduce the quantity of models sold in the U.S., passing on all tariff costs to consumers.
Daniel Ives, an analyst at Wedbush Securities, believes that average car prices could increase by $5,000 to $10,000, with prices rising right off the production line.
Finished cars that arrive at U.S. ports before the tariffs take effect are in demand as they are not subject to the new tariffs, allowing for lower prices.
According to reports by AOL, a major European car manufacturer revealed that they had shipped as many luxury car models to the U.S. as possible before the tariffs were implemented.
Many consumers wary of high tariffs have decided to make car purchases recently.
Justin Emerson, a salesperson at an Audi dealership in suburban Phoenix, reported that in the past few weeks, used cars have been selling quickly. On the day the car tariffs were announced, a couple concerned about the tariffs purchased a car.
Normally having 28 to 35 used cars in stock, Emerson mentioned that they are now left with only half. Nicole Foster, who works in the healthcare industry in Houston, said the looming tariffs prompted her to change her mind about buying a new car.
Her car warranty expires at the end of this year, and although she had no plans to buy a new car, the imminent tariffs persuaded her otherwise. In December 2024, she traded her 2018 Volkswagen Tiguan for a 2024 model to avoid tariff impacts. “When I saw the car, I signed the papers right away. Under normal circumstances, I wouldn’t have done that,” she said.
CEO of AEG, Patrick L. Anderson, advised, “If you are looking to buy a new car and find one you like, my suggestion is to purchase it immediately.” He added, “If you have a reliable used car, my advice is to maintain it well because that car may last longer than expected.”