How Trump’s Tariffs on Canada and Mexico Could Drive Up Car Prices by $12,000: What You Need to Know

New car prices may jump by up to $12,000 following President Trump’s tariffs on Canada and Mexico, according to a recent report. These tariffs will add 25% to the costs for auto manufacturers, significantly raising the price of vehicles.

The study by Anderson Economic Group highlights that building a crossover utility vehicle could cost at least $4,000 more. Electric vehicles might see increases three times that amount. Unfortunately, consumers are likely to bear these extra costs.

Patrick Anderson, CEO of the consulting firm, stated that such price hikes would likely lead to a sharp decrease in sales of affected models. This is particularly concerning as vehicle prices are already high, with the average new car selling for nearly $50,000.

Just last month, the average transaction price was $49,740, which is close to the peak price reached in December 2022. The implementation of these tariffs was delayed but is now set to start soon.

Experts warn that the tariffs could exacerbate price hikes in the auto industry and may force manufacturers to pause or stop production of popular models like the Chevrolet Silverado and Ford Bronco Sport.

Auto industry leaders are understandably worried. Ford’s CEO Jim Farley expressed that these tariffs could create an unprecedented crisis in the U.S. auto industry. Executives from major automakers like Ford, General Motors, and Stellantis recently held discussions with the Commerce Department to voice their concerns about the potential impact of these tariffs.

They suggested focusing tariffs only on imported vehicles that lack American-made parts, as many U.S. vehicles include components from abroad. For instance, while Tesla assembles all its cars in the U.S., about 20% of their parts still come from Mexico.

As prices soar, many consumers might hesitate to purchase new vehicles, leading to lower sales overall. Automakers are likely to feel the pinch as they may need to halt production of certain models, which could compound their sales decline.

Dan Hearsch, an expert in the automotive industry, predicts up to half a million fewer auto sales due to pauses in production from facilities in Canada and Mexico. Popular Ford models, like the Maverick and the Mustang Mach-E, are made in Mexico, while GM and Stellantis also rely on plants in both Mexico and the U.S. for production.

This disruption may result in the unavailability of certain car models entirely. For example, Honda has shifted plans to make its latest Civic in the U.S. instead of Mexico. Stellantis has also adjusted its strategy to increase U.S. manufacturing jobs after discussions with Trump.

Meanwhile, Volkswagen is considering U.S. production sites for its Audi and Porsche brands to avoid these tariffs. Automakers are scrambling to stockpile parts and adjust their supply chains to minimize the disruptions caused by the impending tariffs.

As Secretary of Commerce Howard Lutnick confirmed that these tariffs would go into effect soon, it’s still uncertain how long they will last, with the Biden administration suggesting they aim to address issues like fentanyl smuggling across the border.

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