U.S. car owners should prepare for increased prices because costs are expected to rise during the upcoming weeks or days.
The president Donald Trump announced plans to impose 25% tariffs on imported cars and automotive components which will start on April 3. The new policy will increase the production expenses for every vehicle sold in the U.S. market including imported and domestically manufactured cars by thousands of dollars for each vehicle.
The implementation of these tariffs would lead to increased costs which would rapidly drive up retail prices. The tariff proposals faced two previous delays before being put on hold.
According to Ivan Drury director of insights at Edmunds.com the price increase will be substantial. Consumers can expect sudden and unexpected price increases from the tariffs before some of the now more expensive cars reach dealership lots according to his predictions.
The exact price increases remain difficult to determine at this time according to Drury. The price increase will exceed several thousand dollars according to most experts.
Automakers will likely distribute their tariff costs across various channels instead of raising their wholesale prices to the full extent. Instead, they could offset costs in subtler ways.
He pointed out that manufacturers would eliminate their generous incentives from the market. According to Drury’s analysis manufacturers could eliminate the 1.9% loan rate subsidy to save money but this change would increase the total price buyers need to pay by $6,000 to $7,000.
The tariffs imposed on American-made vehicles will affect all cars regardless of their domestic origin since they aim to promote U.S. manufacturing through market steering. The 10.2 million U.S.-assembled vehicles produced last year depended on substantial foreign parts mainly from Canada and Mexico.
According to a Trump administration fact sheet the average domestic content amounts to “conservatively 50%” but experts believe this number could be closer to 40%. A $40,000 American-made vehicle could still incur $5,000 in tariffs when its imported components reach 50% of the total value.