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President-elect Donald Trump He was frank about the possibilities Raising tariffs On imported goodsThis is what experts say may lead to higher car prices.
Trump talked about additional implementation 10% customs tariff on goods imported from ChinaIn addition to adding customs duties of 25% on all products coming from Mexico and Canada. on FridayTrump has told the European Union that it must reduce the trade gap with the United States by purchasing oil and gas, otherwise he could face tariffs as well.
Tariffs are taxes on imported goods, paid by US companies that import those goods.
Tariffs have the potential to disproportionately affect car prices because the materials used to assemble a car come from different parts of the world. Some components even cross U.S. borders multiple times before reaching a factory, according to Evan Drury, Edmunds' director of insights.
“There is no such thing as a 100 percent American car,” Drury said. “There's a lot of complexity, even though it seems straightforward.”
Plug-in tariffs could add $600 to $2,500 per vehicle on parts of Mexico, Canada and China, according to estimates in a Wells Fargo analyst note. Prices for vehicles assembled in Mexico and Canada — which account for about 23% of vehicles sold in the U.S. — can rise from $1,750 to $10,000.
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Experts say that if the tariffs are enacted, the sticker prices paid by drivers at the agency will eventually rise. But automakers and sellers may have to bear some costs as well.
“The cost will be spread across all stakeholders: automakers, dealers and consumers,” said Erin Keating, executive analyst at Cox Automotive. “No company is going to throw all these expenses directly onto their customers.”
Here's what you should know.
Why might cars incur more tariffs than other goods?
Experts say the supply chain in the automotive sector is unique because some parts move back and forth across international borders while the part is built and assembled.
“People don't really know where their vehicles are manufactured and how they are assembled from parts all over the world,” Drury said.
Take the steering wheel, for example. Electronic sensors or other parts that go into the steering wheel come to the United States for assembly from countries like Germany, Drury said. The steering wheel is then sent to Mexico to be stitched, then returns to the United States to be installed in the car.
Keating said more tariffs could be applied to vehicles than to other products, given the supply chain.
If tariffs increase the cost of manufacturing, automakers can't risk passing the entire tab to the shopper, experts say.
Automakers and dealers may have to “bear some of the burden,” Drury said. “If you look at how expensive cars are with these tariffs, there is no way they can move that many (cars).”
There is a bright side, however, as Keating said many of the cars that will be in early 2025 have already been assembled or are currently being built, increasing the supply available next year.
What car shoppers can expect in 2025
Car shoppers in 2025 are unlikely to see prices affected by the new tariffs, experts say. Base prices will be roughly the same, and dealers are likely to offer more incentives to attract buyers next year.
The average transaction price for new cars is expected to range between $47,000 and $48,000, according to Keating. As of November, the average price was $48,724, 1.5% higher than the previous year. per Kelly blue book data.
While the average price is higher than pre-pandemic levels, “the good news is that it's relatively stable. We're not swinging all over the place,” Keating said.
As of December, auto loan rates for new cars averaged 9.01% while borrowing costs for used cars were 13.76%. per Cox Automotive. Average interest rates for both types of loans decreased About a full percentage point from a 24-year high earlier this year.
“We expect consumers to see lower interest rates by the spring, which will create the most normal and favorable purchasing environment since 2019,” said Jonathan Smock, chief economist at Cox Automotive. books In the report.
For now, experts are optimistic about the auto market next year as inventory and deal opportunities grow.
“Whether there are tariffs or not, there will be more incentives,” Drury said.
