- The 25% tariff imposed by the Trump administration on imports from Canada and Mexico takes effect today.
- They won't immediately be felt by consumers as car dealers still have vehicles in stock, but buyers will feel it once dealer stocks run out.
- They could increase the price of Canadian- and Mexican-made cars and cars made in the U.S. with parts from these countries.
Today is the day when the 25% import tariffs that President Donald Trump has been threatening the United States’ northern and southern neighbors are supposed to take effect. This is expected to raise the price that U.S. consumers pay for cars made in Canada and Mexico by over $12,000 for some electric vehicles.
Car buyers in the U.S. will bear the brunt of this price hike on top of the 20% price increase they’ve seen over the last five years. Bloomberg quotes Patrick Anderson, chief executive officer of the Michigan-based Anderson Economic Group, who said, “That kind of cost increase will lead directly—and I expect almost immediately—to a decline in sales of the models that have the biggest trade impacts.”
The analyst expects that the tariffs will increase the price of a North American-made large SUV by around $9,000 and $8,000 for a pickup truck. It will likely result in some models eventually not being available in the U.S. at all, as manufacturers and dealers will decide it uneconomical to try to make money selling them here.
This will also affect cars made by American brands like Ford, whose Maverick pickup, Bronco Sport and Mustang Mach-E are manufactured in Mexico. The Blue Oval also has an engine plant in Windsor, Ontario, which will also be affected. This prompted Ford CEO Jim Farley to say last month that imposing tariffs would “blow a hole in the U.S. industry that we have never seen.”
General Motors and Stellantis also manufacture vehicles and parts in Mexico and Canada and will be similarly affected. Those include several of GM's EVs, including the Chevrolet Blazer EV and Equinox EV, which are made in Mexico. Around one-quarter of all vehicles sold in the U.S. last year came from there and Canada, and lots of U.S.-made cars have large supply chains that cross the northern and southern borders.
This won’t just affect vehicles manufactured in the two neighboring countries but also ones made in the U.S. with imported parts. According to the Wall Street Journal, this could add up to $3,000 to the price of U.S.-made cars. This will even affect Tesla, which sources around 20% of the parts for the vehicles it builds in the States from Mexico.
Car buyers won’t immediately feel the effect of the tariffs since dealers still have cars in stock that were imported before the tariffs. However, as these pre-tariff cars find buyers, dealers will have to replenish their stock with new cars, which will cost them 25% more to bring in, and a lot of the difference will be passed on to the consumer.
Many experts believe this has all the makings of the start of an all-out trade war between countries that have had friendly relationships of cooperation for decades—in fact, these new tariffs violate the trade agreement that Trump brokered during his first term. Those kinds of agreements made American automakers open production facilities in these countries, as well as include them in their supply chains for locally manufactured cars. It’s estimated that the two-way trade between the U.S. and its neighbors was $2.2 trillion in 2024, but it will probably start going down.
In the short term, nothing will appear different. However, if you are thinking of buying a new car in the near future, you may want to hurry to catch one at its current price.
Whether this will have the desired effect that the Trump administration says it wants, which is to encourage buying cars made in the U.S. with U.S.-sourced parts, remains to be seen. What it will surely do is spur the used market, and it will likely lead to more imports of second-hand vehicles from outside the country.
Trump admitted that U.S. consumers may feel “some pain” as a result of the tariffs, but he then reinforced his point that this is the way for America to achieve the greatness it’s lost, in the President’s view. We’re not sure consumers are too thrilled about the prospect of losing about $1,250 in purchasing power annually, according to a Yale University Budget Lab study called The Economic and Fiscal Effects of the Trump Administration's Proposed Tariffs, quoted by MarketWatch.
Even worse, companies could choose to close their factories in Canada and Mexico since the tariffs may make it uneconomical to produce there. This could potentially cull thousands of jobs, and it will also antagonize them and make them impose their own tariffs as a retaliatory measure meant to protect their interests at the expense of the U.S. And while Trump wants more manufacturing at home, new car plants to take the places of shuttered old ones would take years to build—if they happen at all.
Most economic analysts seem to be pointing to all of this likely having a negative impact on all parties involved, including Americans with lower and average incomes, who will probably be the most affected.
