President Trump's 25% tariffs on vehicles assembled outside the US and imported auto parts are expected to increase car prices considerably. Estimates suggest price increases ranging from $2,500 to $4,500 for smaller vehicles to $10,000 to $12,000 for SUVs and even more for electric vehicles. Luxury imports could see price hikes exceeding $20,000.
The auto industry is likely to spread these price increases across all vehicle types rather than focusing on specific models. Manufacturers may reduce production of models that become excessively expensive due to the tariffs. The current situation is described as challenging for both consumers and manufacturers.
Car shopping may be especially challenging this year.
President Trump’s 25 percent tariffs on all vehicles assembled outside the United States took effect on Wednesday. The tariffs will also apply to imported auto parts, beginning May 3, though carmakers will not have to pay duties on parts like engines or batteries that were made in the United States and later installed in cars in Mexican or Canadian factories.
The tariffs could deal a major blow to the auto industry, which has also been affected by a second set of tariffs, 25 percent on imports of steel and aluminum, that took effect last month.
This translates to a daunting market for car shoppers, who are already rattled by the high cost of new vehicles and the expensive loans to buy them.
The potential impact of the tariffs on prices for new American cars ranges from $2,500 to $4,500 for some small crossovers and sedans to $10,000 to $12,000 for full-size S.U.V.s and $15,000 or more for some battery-electric vehicles, according to the latest estimates from Anderson Economic Group, a consulting firm in East Lansing, Mich. The effect on luxury cars imported from Europe and Asia could be much higher — $20,000 or more. The average transaction price for a new vehicle is about $45,000 or more than $48,000, depending on the data source.
“It’s a crazy situation for consumers, and even more difficult for manufacturers,” said Patrick Anderson, chief executive of the Anderson firm.
The impact of the tariffs would vary by car model, since some rely more on imported parts than others. But rather than vastly increasing the price of specific vehicles, the industry is likely to spread increases across all types — “like peanut butter” — to smooth out the price increases, said Tyson Jominy, vice president of data and analytics at the market research firm J.D. Power. Mr. Anderson said manufacturers would “almost certainly cut back” on models that became significantly more expensive.
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