New car prices could surge as much as $12,000 after President Trump’s tariffs on Canada and Mexico take effect, according to a report.
The president’s 25% tariffs on the neighboring countries would send the cost to build a crossover utility vehicle up at least $4,000, according to a new study from Anderson Economic Group, an automotive research and consulting firm.
The increase would be three times that for an electric vehicle, and the costs will likely be passed on to the consumer, according to the study, earlier reported by Bloomberg.
“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, the consulting firm’s chief executive, told Bloomberg.
Vehicle prices are already unusually high due to pandemic-era inflation, nearing $50,000 on average for new car sales.
The average transaction price last month was $49,740 – just $200 shy of its December 2022 peak, according to a Kelley Blue Book report.
After a month-long pause, Trump’s hefty tariffs are set to take effect on Tuesday.
Experts are warning the taxes could worsen price hikes across the auto industry, and force carmakers to halt production of some popular models, like the Chevrolet Silverado pickup and Ford Bronco Sport SUV.
The planned tariffs have sent auto executives into panic mode, with Ford CEO Jim Farley warning last month that they would “blow a hole in the US industry that we have never seen.”
Top brass at General Motors, Ford and Stellantis – which owns brands including Jeep, Dodge and Ram – met with the Commerce Department last week via Zoom to share their concerns, people familiar with the matter told Bloomberg.
The vehicle execs reportedly asked the White House to focus solely on imported cars that don’t contain any US-made parts, since many US-manufactured vehicles contain parts from other countries.
Tesla – owned by close Trump ally and DOGE leader Elon Musk – produces all of its US-sold cars on domestic soil. But they still contain about 20% of parts that come from Mexico, according to the National Highway Traffic Safety Administration.
Auto sales will likely falter under the tariffs as consumers steer away from potentially record-breaking prices.
Automakers will feel even more pain as they’re forced to end the production of some vehicles, which will further hurt sales, according to Dan Hearsch, leader of the Americas automotive unit at consulting firm AlixPartners.
He predicted US auto sales could fall by as much as half a million vehicles as automakers press pause on the production of some vehicles that come from facilities in Canada and Mexico.
“Some of those vehicles that can’t be produced in the US just probably won’t be made for a while,” Hearsch told Bloomberg.
Ford’s popular Maverick pickup truck, Bronco Sport SUV and electric Mustang Mach-E are made in Mexico. GM produces its Chevrolet Silverado pickups in Mexico, Canada and the US, and Stellantis manufactures Ram pickups in Mexico and the US.
While automakers will try to move as much production capacity to the US as possible, they’ll likely face challenges replacing steps in their complex North American supply chains on a quick turnaround.
“You’ll see some model and trim types just disappear,” Anderson told Bloomberg.
Honda has reportedly scrapped plans to manufacture its latest Civic model in Mexico, pivoting to its Indiana facility, according to a Reuters report on Monday.
Stellantis already reversed plans to shutter its Illinois plant in January after its chairman, John Elkann, met with Trump and promised to boost US manufacturing jobs.
Volkswagen, meanwhile, is reportedly weighing US production sites for its Audi and Porsche brands to avoid the proposed taxes, according to a German news outlet.
Automakers have also been rushing to move materials over the border into the US ahead of the tariffs.
“It’s got everybody in an absolute spin,” Hearsch said.
Secretary of Commerce Howard Lutnick said on Sunday that the planned tariffs would move forward on Tuesday.
It’s unclear how long the taxes will remain in place, since the White House has said they are meant to pressure bordering countries to stem the flow of illegal fentanyl smuggling.
