- A new study predicts car prices will rise significantly once Trump’s tariffs take effect.
- Many vehicles could see price hikes of around $4,000, while EVs may rise up to $12,000.
- Trump says the 25% tariff on imports from Mexico and Canada takes effect March 4.
If you’re thinking about buying a new car, you might want to hit pause and consider a few things first. A new study from the Anderson Economics Group (AEG) warns that prices are set to skyrocket due to Donald Trump’s 25 percent tariff on imports from Mexico and Canada, which is confirmed to take effect on March 4. And while that alone would be a blow to your wallet, it’s just adding to the chaos already simmering in the automotive industry.
Read: Stellantis Chief Opposes Trump’s Tariffs, Suggests Another Way
The group based its findings on the proposed 25% tariffs against Mexico and Canada and a 10% tariff against China. Using those figures, it predicts that even small crossovers will see at least a $4,000 price increase. Large SUVs with “significant content” from Mexico would go up by roughly $9,000 and trucks would see a similar bump.
Electric Vehicles: The Biggest Losers
Electric vehicles will get hit hardest though. AEG believes they’ll see an increase of $12,000 on average. Combine that with the potential death of EV subsidies and that market could stall for some time. “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,” Patrick Anderson, chief executive officer of Anderson Economic Group, told Bloomberg. “You’ll see some model and trim types just disappear,” he said.
So, why are EVs getting hit harder than your standard gas guzzler? It’s all about the materials. “All electric vehicle makers are going to feel the pressure from those [tariffs], because they use way more steel and aluminum than a conventional combustion-engine car,” Marc Busch, professor of international business diplomacy at Georgetown University told CNBC. “So I have no doubt that this will get [Musk’s] attention, and I can imagine that that would be an added political pressure benefit in terms of retaliatory strikes by the European Union, Canada and others.”
Now, Tesla’s situation is interesting. They build their US-sold vehicles in Fremont, California, and Austin, Texas, but the parts? Many are sourced from China, Canada, and Mexico. For example, 15% of the Model Y’s components come from Mexico. They’re already scrambling to avoid a rise in the 25% tariff on Chinese graphite, a key material for lithium-ion batteries.
It’s worth noting that all three of the major US automakers produce vehicles in Mexico, Canada, or both. Ford manufactures the Mustang Mach-E, Bronco Sport, and Maverick in Mexico. Ram trucks are built in both Mexico and the USA, while GM’s Silverado is a product of all three nations involved.
Automakers Already Making Moves
In the meantime, automakers are doing what they can to counter the potential tariffs. Some are having suppliers build up stock. Others are storing parts in strategic locations to avoid getting hit with the tariffs. It’s clear that the automotive industry wasn’t expecting this and isn’t entirely sure what to plan for.
A union representative told Bloomberg that Ford is “racing product over the US-Canada border in anticipation of the tariffs.” In addition, it’s securing warehouse storage so that it can keep all of these parts secure and safe from the potential tariffs.
“We usually store them here (Ontariot, Canada) until we’re ready to send to the truck plants,” D’Agnolo said. “But they’re finding places in the states to store those engines so that they don’t get tariffed.”
Tick-Tock: Tariffs Set to Hit March 4
With the tariffs set to take effect on March 4, it seems like there’s little time left to avoid the impact. Politico reported that Trump told reporters at the White House earlier today, “There’s no room left for Mexico or for Canada” to negotiate. “They’re all set. They go into effect tomorrow.”
