Trade War
U.S. car buyers face higher prices, less choice under Trump’s tariffs
BNNBloomberg.ca will explain what this means for the business community, investors, and the market.
U.S. car buyers face higher prices, less choice under Trump’s tariffs
By Reuters
March 28, 2025
March 28, 2025
'Sale' is spelled out in the open hoods of used cars at a Toyota dealership
(AP / Reed Saxon)
LONDON/WHITE LAKE, Michigan — Major automakers can deal with U.S. President Donald Trump’s tariffs on U.S. auto imports in a number of ways, but all of them lead to higher prices, fewer choices of models or limits on features for consumers, industry experts said.
Trump announced 25 per cent tariffs on car and auto parts on Wednesday, sending global automakers’ shares down and raising fears of job losses in big auto-exporting countries. He says the levies will ultimately boost production in the United States, but analysts say the immediate effect will be on automakers’ choices that will hit consumers’ wallets.
“Most car makers can’t eat 25 per cent, they just can’t,” said Andy Palmer, former CEO of Aston Martin. “That means car makers will pass on as much of the cost of tariffs as they can,” including by removing features to lower their costs while also raising prices.Latest news & updates on tariffs and the trade war here
Automakers may spread that cost between U.S.-produced and imported models, cut back on features, and in some cases, stop selling affordable models aimed at first-time car buyers, as many of those are imported and less attractive if they carry a higher price tag.
The changes could price more Americans out of the market. S&P Global Mobility estimated Thursday that tariffs will cause annual U.S. vehicle sales to fall to a range of 14.5 million to 15 million in coming years from 16 million in 2024. Cox Automotive estimates tariffs will add US$3,000 to the cost of a U.S.-made vehicle and US$6,000 to vehicles made in Canada or Mexico without exemptions.
While luxury sellers like Bentley or Ferrari say they will pass on costs, major automakers’ typical margins of 6 per cent to 8 per cent leave little wiggle room.
Affordable models most likely to be affected include the Honda CR-V, Chevy Trax, Subaru Forester, Chevy Equinox and Honda HR-V, said Erin Keating, executive analyst at Cox.
“Car makers know they have certain vehicles in their portfolio that can tolerate lower profit margins,” Keating said. “Some vehicles may just prove to be too expensive, and most of those are affordable models manufactured outside the U.S.”
After 10 per cent of the car-buying population was priced out of the market during the coronavirus pandemic, affordability still remains high on consumers’ minds, Keating said.
“Would tariffs bite into another 10 per cent of people who would be priced out?” she said. “Potentially.”
U.S. auto dealers currently have plenty of inventory - about 90 days worth - but prices could start to rise after that. In recent weeks, Eric Mann, sales manager at the Szott M-59 Jeep dealership in White Lake, Michigan, 45 minutes northwest of Detroit, noticed more customers purchasing out of fear of higher prices.
Loretta Acosta, 55, of Macomb, Michigan, was checking out a Jeep Grand Cherokee at the Szott dealership on Thursday and said it “might stink” if car prices rise because of tariffs. “But I do feel like sometimes stuff stinks, and you got to put up with it for the betterment of the country,” Acosta said.
‘Everyone hurts’
European and Asian car makers, deprived of the largest auto importing market, could cut production. If automakers stop shipping a model to the U.S., that would translate into lower production at those factories. Lower volumes mean higher costs per vehicle, “which ultimately will be passed on to consumers” in those markets, Palmer said.
On Thursday Jeron Reed, 46, of Warren, Michigan, went to Matick Chevrolet in Redford, 20 minutes west of Detroit, to finalize a lease on a 2025 Equinox EV because of the tariff threat.
“What I’m hearing within the next couple of weeks (is) prices are probably gonna jump, and they’re already high,” Reed said.
Some companies selling U.S.-made cars with a high percentage of tariff-exempt parts could raise prices to boost profits but still keep them low enough to take market share from tariff-affected rivals. Longer-term, major automakers would have to decide whether to ride out tariffs on a bet that they won’t last, or spend two to three years moving production and supply chains under the expectations that tariffs would last beyond Trump’s presidency, said Mark Wakefield, global automotive market lead at consultancy AlixPartners.
“Those ones could be big winners in three or four years if the tariffs really stay in,” Wakefield said. “Or they could be losers if it somehow unwinds and they’re stuck with higher costs.”
Newer automakers like INEOS Automotive do not have that luxury. The France-based manufacturer started selling its off-road Grenadier model in the United States early last year at an average price of around US$85,000, said CEO Lynn Calder. INEOS has since sold 8,000 vehicles in the U.S., or 60 per cent of its total.
“I don’t think it’s possible to pass a price increase in the range of 25 per cent onto a consumer,” she said. “But equally, it’s also very clear that we can’t absorb it all.”
She said INEOS will split the burden between the company, its dealers and consumers, a hybrid solution where “everyone hurts.”
---
Reporting By Nick Carey; additional reporting by Nora Eckert in Detroit; Editing by Leslie Adler.
---
U.S. President Donald Trump’s reciprocal tariffs on trading partners are set to take effect on April 2, a day he has proclaimed as “Liberation Day” for American trade. CTV News will have extensive coverage across all platforms:CTVNews.ca will have in-depth coverage, real-time updates, and expert analysis on what the tariffs will mean for Canadians.
CP24.com will report on any developments out of Queen’s Park and what the tariffs means for the people of the GTHA.
LONDON/WHITE LAKE, Michigan — Major automakers can deal with U.S. President Donald Trump’s tariffs on U.S. auto imports in a number of ways, but all of them lead to higher prices, fewer choices of models or limits on features for consumers, industry experts said.
Trump announced 25 per cent tariffs on car and auto parts on Wednesday, sending global automakers’ shares down and raising fears of job losses in big auto-exporting countries. He says the levies will ultimately boost production in the United States, but analysts say the immediate effect will be on automakers’ choices that will hit consumers’ wallets.
“Most car makers can’t eat 25 per cent, they just can’t,” said Andy Palmer, former CEO of Aston Martin. “That means car makers will pass on as much of the cost of tariffs as they can,” including by removing features to lower their costs while also raising prices.Latest news & updates on tariffs and the trade war here
Automakers may spread that cost between U.S.-produced and imported models, cut back on features, and in some cases, stop selling affordable models aimed at first-time car buyers, as many of those are imported and less attractive if they carry a higher price tag.
The changes could price more Americans out of the market. S&P Global Mobility estimated Thursday that tariffs will cause annual U.S. vehicle sales to fall to a range of 14.5 million to 15 million in coming years from 16 million in 2024. Cox Automotive estimates tariffs will add US$3,000 to the cost of a U.S.-made vehicle and US$6,000 to vehicles made in Canada or Mexico without exemptions.
While luxury sellers like Bentley or Ferrari say they will pass on costs, major automakers’ typical margins of 6 per cent to 8 per cent leave little wiggle room.
Affordable models most likely to be affected include the Honda CR-V, Chevy Trax, Subaru Forester, Chevy Equinox and Honda HR-V, said Erin Keating, executive analyst at Cox.
“Car makers know they have certain vehicles in their portfolio that can tolerate lower profit margins,” Keating said. “Some vehicles may just prove to be too expensive, and most of those are affordable models manufactured outside the U.S.”
After 10 per cent of the car-buying population was priced out of the market during the coronavirus pandemic, affordability still remains high on consumers’ minds, Keating said.
“Would tariffs bite into another 10 per cent of people who would be priced out?” she said. “Potentially.”
U.S. auto dealers currently have plenty of inventory - about 90 days worth - but prices could start to rise after that. In recent weeks, Eric Mann, sales manager at the Szott M-59 Jeep dealership in White Lake, Michigan, 45 minutes northwest of Detroit, noticed more customers purchasing out of fear of higher prices.
Loretta Acosta, 55, of Macomb, Michigan, was checking out a Jeep Grand Cherokee at the Szott dealership on Thursday and said it “might stink” if car prices rise because of tariffs. “But I do feel like sometimes stuff stinks, and you got to put up with it for the betterment of the country,” Acosta said.
‘Everyone hurts’
European and Asian car makers, deprived of the largest auto importing market, could cut production. If automakers stop shipping a model to the U.S., that would translate into lower production at those factories. Lower volumes mean higher costs per vehicle, “which ultimately will be passed on to consumers” in those markets, Palmer said.
On Thursday Jeron Reed, 46, of Warren, Michigan, went to Matick Chevrolet in Redford, 20 minutes west of Detroit, to finalize a lease on a 2025 Equinox EV because of the tariff threat.
“What I’m hearing within the next couple of weeks (is) prices are probably gonna jump, and they’re already high,” Reed said.
Some companies selling U.S.-made cars with a high percentage of tariff-exempt parts could raise prices to boost profits but still keep them low enough to take market share from tariff-affected rivals. Longer-term, major automakers would have to decide whether to ride out tariffs on a bet that they won’t last, or spend two to three years moving production and supply chains under the expectations that tariffs would last beyond Trump’s presidency, said Mark Wakefield, global automotive market lead at consultancy AlixPartners.
“Those ones could be big winners in three or four years if the tariffs really stay in,” Wakefield said. “Or they could be losers if it somehow unwinds and they’re stuck with higher costs.”
Newer automakers like INEOS Automotive do not have that luxury. The France-based manufacturer started selling its off-road Grenadier model in the United States early last year at an average price of around US$85,000, said CEO Lynn Calder. INEOS has since sold 8,000 vehicles in the U.S., or 60 per cent of its total.
“I don’t think it’s possible to pass a price increase in the range of 25 per cent onto a consumer,” she said. “But equally, it’s also very clear that we can’t absorb it all.”
She said INEOS will split the burden between the company, its dealers and consumers, a hybrid solution where “everyone hurts.”
---
Reporting By Nick Carey; additional reporting by Nora Eckert in Detroit; Editing by Leslie Adler.
---
U.S. President Donald Trump’s reciprocal tariffs on trading partners are set to take effect on April 2, a day he has proclaimed as “Liberation Day” for American trade. CTV News will have extensive coverage across all platforms:CTVNews.ca will have in-depth coverage, real-time updates, and expert analysis on what the tariffs will mean for Canadians.
CP24.com will report on any developments out of Queen’s Park and what the tariffs means for the people of the GTHA.
BNNBloomberg.ca will explain what this means for the business community, investors, and the market.
Noted economist honoured by Trump warns his 25 per cent tariffs could add US$4,711 to the cost of a vehicle
By The Associated Press
March 28, 2025
An aerial view shows auto dealerships in Cerritos, Calif., Thursday, March 27, 2025. (AP Photo/Jae C. Hong)
WASHINGTON — Noted economist Arthur Laffer warns in a new analysis that U.S. President Donald Trump’s 25 per cent tariffs on auto imports could add US$4,711 to the cost of a vehicle and says the proposed taxes could weaken the ability of U.S. automakers to compete with their foreign counterparts.
In the 21-page analysis obtained by The Associated Press, Laffer, whom Trump awarded the Presidential Medal of Freedom in 2019 for his contributions to economics, says the auto industry would be in a better position if the Republican president preserved the supply chain rules with Canada and Mexico from his own 2019 USMCA trade pact.
The White House has temporarily exempted auto and parts imports under the USMCA from the tariffs starting on April 3 so that the Trump administration can put together a process for taxing non-U.S. content in vehicles and parts that fall under the agreement.
“Without this exemption, the proposed tariff risks causing irreparable damage to the industry, contradicting the administration’s goals of strengthening U.S. manufacturing and economic stability,” Laffer writes in the analysis. “A 25 per cent tariff would not only shrink, or possibly eliminate, profit margins for U.S. manufacturers but also weaken their ability to compete with international rivals.”
In a Friday interview with The Associated Press, Laffer said the report had caused a “kerfuffle” and cautioned that it only applied to the economics, rather than Trump’s negotiating skills and strategic approach to trade.
“The report shows the economics of what would happen were the tariffs to be put in place,” he said. ”This is about facts, not how we feel.”
The economist was quick to also praise Trump as a negotiator who has deep knowledge of trade issues, indicating that the tariff threats could be used as they had during Trump’s first term to ultimately lower barriers to trade and improve outcomes for the U.S. economy.
“Donald Trump is more familiar with the gains from trade than any politician I’ve ever talked to in my life,” Laffer said. ”Do not take this paper in any way, shape or form as criticizing Donald Trump and what his strategies are."
He added that he trusts the president and sees him as exceptionally competent.
While Trump’s tariff plans have frightened the stock market and U.S. consumers, Laffer’s analysis and other reports show the possible economic risks if the threat of import taxes is unable to produce a durable set of deals with other countries. The paper reminds Trump that it’s not too late to change course, specifically complimenting the USMCA negotiated in his first term as a “significant achievement.”
“The United States-Mexico-Canada Agreement (USMCA) has served as a cornerstone of President Trump’s first term and has quickly become a dominant feature of North American trade policy, fostering economic growth, stabilizing supply chains, and strengthening the U.S. auto industry,” Laffer writes.
The analysis says that the per vehicle cost without the USMCA exemption would be US$4,711, but that figure would be a lower US$2,765 if the exemptions were sustained.
Trump honored Laffer with the highest civilian honor 45 years after the economist famously sketched out on a napkin the Laffer curve, showing that there’s an optimal tax rate for collecting revenue.
The bell-shaped curve indicated that there’s a tax rate so high that it could be self-defeating for generating tax revenues. Many Republicans embraced the curve as evidence that lower tax rates could generate stronger growth that would lead to higher tax revenues.
“Dr. Laffer helped inspire, guide, and implement extraordinary economic reforms that recognize the power of human freedom and ingenuity to grow our economy and lift families out of poverty and into a really bright future,” Trump said in awarding him the medal.
Laffer served on the economic policy advisory board of President Ronald Reagan, in addition to being a university professor. He has his own economic consultancy, Laffer Associates. In 1970, he was the first chief economist of the White House Office of Management and Budget.
Laffer also advised Trump during his 2016 presidential campaign and co-wrote a flattering book, “Trumponomics: Inside the America First Plan to Revive Our Economy.”
Trump maintains that 25% tariffs will cause more foreign and domestic automakers to expand production and open new factories in the United States. On Monday, he celebrated a planned US$5.8 billion investment by South Korean automaker Hyundai to build a steel plant in Louisiana as evidence that his strategy would succeed.
Trump said the 25 per cent auto tariffs would help to reduce the federal budget deficit while moving more production into the United States.
“For the most part, I think it’s going to lead cars to be made in one location,” Trump told reporters on Wednesday. “For right now, the car would be made here, sent to Canada, sent to Mexico, sent to all over the place. It’s ridiculous.”
---
Josh Boak, The Associated Press
WASHINGTON — Noted economist Arthur Laffer warns in a new analysis that U.S. President Donald Trump’s 25 per cent tariffs on auto imports could add US$4,711 to the cost of a vehicle and says the proposed taxes could weaken the ability of U.S. automakers to compete with their foreign counterparts.
In the 21-page analysis obtained by The Associated Press, Laffer, whom Trump awarded the Presidential Medal of Freedom in 2019 for his contributions to economics, says the auto industry would be in a better position if the Republican president preserved the supply chain rules with Canada and Mexico from his own 2019 USMCA trade pact.
The White House has temporarily exempted auto and parts imports under the USMCA from the tariffs starting on April 3 so that the Trump administration can put together a process for taxing non-U.S. content in vehicles and parts that fall under the agreement.
“Without this exemption, the proposed tariff risks causing irreparable damage to the industry, contradicting the administration’s goals of strengthening U.S. manufacturing and economic stability,” Laffer writes in the analysis. “A 25 per cent tariff would not only shrink, or possibly eliminate, profit margins for U.S. manufacturers but also weaken their ability to compete with international rivals.”
In a Friday interview with The Associated Press, Laffer said the report had caused a “kerfuffle” and cautioned that it only applied to the economics, rather than Trump’s negotiating skills and strategic approach to trade.
“The report shows the economics of what would happen were the tariffs to be put in place,” he said. ”This is about facts, not how we feel.”
The economist was quick to also praise Trump as a negotiator who has deep knowledge of trade issues, indicating that the tariff threats could be used as they had during Trump’s first term to ultimately lower barriers to trade and improve outcomes for the U.S. economy.
“Donald Trump is more familiar with the gains from trade than any politician I’ve ever talked to in my life,” Laffer said. ”Do not take this paper in any way, shape or form as criticizing Donald Trump and what his strategies are."
He added that he trusts the president and sees him as exceptionally competent.
While Trump’s tariff plans have frightened the stock market and U.S. consumers, Laffer’s analysis and other reports show the possible economic risks if the threat of import taxes is unable to produce a durable set of deals with other countries. The paper reminds Trump that it’s not too late to change course, specifically complimenting the USMCA negotiated in his first term as a “significant achievement.”
“The United States-Mexico-Canada Agreement (USMCA) has served as a cornerstone of President Trump’s first term and has quickly become a dominant feature of North American trade policy, fostering economic growth, stabilizing supply chains, and strengthening the U.S. auto industry,” Laffer writes.
The analysis says that the per vehicle cost without the USMCA exemption would be US$4,711, but that figure would be a lower US$2,765 if the exemptions were sustained.
Trump honored Laffer with the highest civilian honor 45 years after the economist famously sketched out on a napkin the Laffer curve, showing that there’s an optimal tax rate for collecting revenue.
The bell-shaped curve indicated that there’s a tax rate so high that it could be self-defeating for generating tax revenues. Many Republicans embraced the curve as evidence that lower tax rates could generate stronger growth that would lead to higher tax revenues.
“Dr. Laffer helped inspire, guide, and implement extraordinary economic reforms that recognize the power of human freedom and ingenuity to grow our economy and lift families out of poverty and into a really bright future,” Trump said in awarding him the medal.
Laffer served on the economic policy advisory board of President Ronald Reagan, in addition to being a university professor. He has his own economic consultancy, Laffer Associates. In 1970, he was the first chief economist of the White House Office of Management and Budget.
Laffer also advised Trump during his 2016 presidential campaign and co-wrote a flattering book, “Trumponomics: Inside the America First Plan to Revive Our Economy.”
Trump maintains that 25% tariffs will cause more foreign and domestic automakers to expand production and open new factories in the United States. On Monday, he celebrated a planned US$5.8 billion investment by South Korean automaker Hyundai to build a steel plant in Louisiana as evidence that his strategy would succeed.
Trump said the 25 per cent auto tariffs would help to reduce the federal budget deficit while moving more production into the United States.
“For the most part, I think it’s going to lead cars to be made in one location,” Trump told reporters on Wednesday. “For right now, the car would be made here, sent to Canada, sent to Mexico, sent to all over the place. It’s ridiculous.”
---
Josh Boak, The Associated Press
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