Car Prices Face Significant Surge Due to Proposed Tariffs
Proposed tariffs on imports from Canada and Mexico could dramatically inflate the cost of vehicles in the United States, according to industry analysts and executives. The tariffs, proposed by former President Donald Trump, threaten to increase prices by as much as $12,000 per vehicle, adding further strain to an already challenging automotive market.
“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,” said Patrick Anderson, CEO of Anderson Economic Group.
Potential for Price Hikes
A new study by Anderson Economic Group estimates that the cost to build a crossover utility vehicle could increase by at least $4,000, while the increase for an electric vehicle could be three times that amount. These costs are likely to be passed on to consumers, further impacting affordability. Even before the proposed tariffs, average sticker prices were nearing $50,000, a rise of over 20% in the last five years.
Industry Concerns
Executives from major automakers like General Motors, Ford, and Stellantis have expressed strong concerns about these tariffs.
During a meeting with the Commerce Department, executives from Ford and Stellantis urged a focus on imported vehicles without US parts. Automakers are also considering production adjustments to mitigate the impact. Some vehicles might be discontinued, while others could see production shifted to US factories.
Dan Hearsch, leader of the Americas automotive practice at AlixPartners, foresees a potential drop of half a million vehicles in US auto sales, even with less severe price increases. The situation is especially concerning for models assembled in Canada and Mexico, such as Ford’s Maverick pickup, Bronco Sport SUV, and electric Mustang Mach-e, as well as certain Chevrolet Silverado and Ram pickup models.
Countermeasures and Uncertainties
Automakers are preparing for potential disruptions by stockpiling supplies and urging their suppliers to build up parts inventories. Ford’s engine plant in Windsor, Ontario, is expediting product over the border to avoid the tariffs.
While these measures are temporary, the industry is concerned. The uncertainty in the automotive industry is leading to shifts in strategy, with some short-term planning taking precedence over long-term decisions.
