How Trump’s Tariffs Could Reshape the U.S. Car Market: Price Hikes, Supply Chain Shifts, and Consumer Trends

Trump’s proposed tariffs on imported vehicles and auto parts could significantly impact the U.S. car market. A 25% tariff could raise the average price of a new car by 4,400 with imported models costingupto 6,875 more, according to the Center for Automotive Research. Domestic automakers, which rely on 40% imported parts, could face billions in added costs, potentially leading to job losses and reduced investments.

In 2023, U.S. new car sales were 15.5 million units, down from 17.5 million in 2016. Tariffs could further reduce sales, while also increasing used car prices. For electric vehicles (EVs), a 25% tariff on lithium-ion batteries could add 1,500−1,500−2,000 per vehicle, slowing EV adoption, which currently accounts for 7% of U.S. car sales.

This increase would likely trickle down to used cars as well, as demand for more affordable options rises. Higher prices could lead to a decline in new car sales, which have already been slowing in recent years. In 2023, U.S. new car sales were approximately 15.5 million units, down from a peak of 17.5 million in 2016. Tariffs could exacerbate this trend, pushing sales even lower.

Impact on Domestic Auto Manufacturers

American automakers dominate vehicle assembly both north and south of the U.S. border, with General Motors (GM) playing a key role in this landscape. GM heavily depends on its Ramos Arizpe plant in Mexico to drive its transition to electric vehicles (EVs). This facility produces the Chevy Blazer EV and Equinox EV, as well as the Honda Prologue, and is gearing up to manufacture the 2025 Cadillac Optiq. Additionally, the gas-powered Chevy Blazer is also assembled at the same location, highlighting the plant’s critical role in GM’s production strategy.

Ford manufactures some of its popular and affordable models in Mexico. The Bronco Sport and Maverick are assembled in Hermosillo, while the Mustang Mach-E, which achieved record sales in 2024 with 51,745 units sold, is produced in Cuautitlán Izcalli. Although the Mach-E is also assembled in China, importing it from there would result in higher tariffs. Ford is less vulnerable to tariffs on Canadian imports. The Oakville plant is currently not in operation, and those who are willing to spend over $300,000 on a Mustang GTD, which is hand-built by Multimatic in Ontario, are likely to be able to afford any price increases.

Manufacturer	Model	Country of Assembly	2024 U.S. Sales	Percentage of Foreign Content	Primary Foreign Content Source
General Motors	Chevrolet Equinox	Canada	2,12,072	34%	Canada
General Motors	GMC Terrain	Mexico	87,925	60%	Mexico
Ford	Fusion	Mexico	1,66,045	25%	Mexico
Toyota	RAV4	Canada	4,48,071	40%	Canada
Honda	CR-V	Canada	3,33,502	30%	Canada
Nissan	Sentra	Mexico	1,84,618	42%	Mexico
Volkswagen	Jetta	Mexico	1,00,453	66%	Mexico
Fiat Chrysler	Ram 1500	Mexico	6,33,694	15%	Mexico
Mazda	Mazda3	Mexico	50,741	5%	Mexico
Kia	Forte	Mexico	95,000	20%	Mexico

Shifts in Consumer Preferences

As prices rise, consumers might shift their preferences toward more affordable or fuel-efficient vehicles, including electric cars (EVs). However, tariffs could also impact the EV market. For instance, a 25% tariff on lithium-ion batteries, which are primarily imported from China, could increase the cost of producing an EV by 1,500 to 2,000 per vehicle, according to BloombergNEF.

This could slow the adoption of EVs, which accounted for about 7% of total U.S. car sales in 2023. If tariffs make EVs less affordable, the U.S. car market might struggle to meet sustainability goals, such as the Biden administration’s target of having 50% of new car sales be electric by 2030.

Global Supply Chain Disruptions

Trump’s tariffs could disrupt global supply chains, leading to delays in vehicle production and shortages in the U.S. car market. For example, during the 2018-2019 trade war, automakers like Toyota and BMW faced significant challenges sourcing parts, resulting in production delays and increased costs.

Job Market and Economic Impact

The U.S. automotive industry employs over 1 million workers directly and supports nearly 10 million jobs indirectly, according to the Alliance for Automotive Innovation. Tariffs could jeopardize these jobs by increasing costs for automakers and reducing sales. A 2019 study by the Peterson Institute for International Economics estimated that Trump’s auto tariffs could result in the loss of 195,000 U.S. jobs over three years.

The question of “How Trump’s Tariffs Could Affect the U.S. Car Market” remains a hot topic, with both potential benefits and drawbacks. While tariffs aim to protect domestic industries, their broader impact on prices, consumer behavior, and global trade dynamics could create significant challenges for the automotive sector.