President Donald Trump confirmed late Monday that his administration will enact tariffs on Canada and Mexico at midnight tonight.
“They’re all set. They go into effect tomorrow,” Trump told reporters at the White House. The New York Times explains, “The tariffs will add a 25% fee on all Mexican and Canadian exports coming across those borders and an additional 10% for Chinese goods.”
Trump has not set an expiration date on the measure, and negotiators from all involved countries are reportedly meeting to discuss how to lift the levies.
New Car Prices Will Rise
Tariffs will likely raise the price of virtually every car sold in the United States, new and used, but may not show up on window stickers overnight.
The Washington Post explains, “More than half of goods classified as automotive vehicles, parts, and engines come from Canada and Mexico.” Automakers headquartered in the U.S., Europe, and Asia all own factories in Mexico or Canada and bring finished cars across the border — about 3.6 million last year, according to S&P Global Mobility. Those will all see their sticker prices inflate by 25% or more.
However, even cars built in the U.S. use many parts from Canada and Mexico. There are no purely American cars. Industry publication Automotive News explains, “Modern North American automotive supply chains are extremely complex and were built with minimal trade barriers in mind. Parts can cross the border several times before a vehicle is completed.”
A part will see its price increase every time it crosses a border. That means many cars will see their prices rise by more than 25%. Mexico and Canada may retaliate with matching tariffs, doubling the impact.
Two recent analyses found that the average car’s price could rise by at least $3,000. One more recent and arguably more thorough analysis concluded that the total could be much higher — as high as $9,000 for a midsize SUV and over $10,000 for a full-size truck.
Used Car Prices Will Rise, Too
Used car prices will likely rise in response as would-be new car shoppers head to used car lots in search of something they can afford. The price of the average used car fell slightly last month, but dealers warned that they were slightly short on inventory at the start of tax season. Americans typically head to used car lots in heavier numbers once tax returns appear in bank accounts.
Repair, Insurance Costs Will Spike
Most car parts used in auto repairs are imported, often from Canada or Mexico. That will inflate the cost of car repairs.
With it, insurance costs will rise. A recent analysis from insurance pricing service Insurify predicted that the tariffs will push car insurance rates up “8% by the end of 2025, from $2,313 to $2,502.”
But Sticker Prices Won’t Rise Overnight
The tariffs will apply as cars and parts cross the border. However, the vehicles on dealer lots are already here and won’t see the levy added to their prices.
Automakers aim to keep about a 75-day supply of used cars — 60 days on dealer lots and another 15 in transit — at all times. Some are well short of that figure this year. But a few are over it.
Shoppers are likely to see tariff-impacted prices first at Lexus and Toyota, each with close to a 40-day supply at the moment. Other brands, including Ford, Lincoln, Buick, Jeep, Ram, and Mercedes-Benz, have over 100-day supply in stock.
Some reportedly moved extra cars into the country ahead of the tariff deadline to have a backstop of cars at pre-tariff prices available for purchase.
Shoppers could see prices at those lots hold steady for weeks as inventory drains down. They will rise as the companies are forced to import more cars or decide to pause production to wait for political developments.
Shoppers who can move quickly might still find pre-tariff prices easy to find.
Companies Can’t Change Supply Lines Quickly
Trump has mused that automakers and parts suppliers should move production to the U.S. to get around the tariffs. That’s challenging, however.
Automotive News explains, “Most companies have few options to shift production or parts sourcing to reduce tariff exposure because of yearslong product cycles and massive investment requirements.”
The design cycle for a new car can take 10 years. Trump, in his second term, will be in office less than four. Automakers make few decisions with a horizon as short as four years.
Instead, Automotive News explains, “Automakers could also decide to halt vehicle production, especially if they think the tariffs could be lifted quickly.” Some factories could fall silent while negotiations aimed at lifting the tariffs drag on.
Anderson Economic Group, a consultancy specializing in the auto industry, predicted last week that the tariffs could impact the industry more than last year’s record-breaking United Auto Workers union strike.
“Meanwhile, many automakers and suppliers have held off on making major investment and production decisions until they get a sense of the new trade environment,” Automotive News reports. Last week, Ford told suppliers it might delay the launch of its next F-150, America’s best-selling vehicle, keeping the current model on the road longer while it waits for clarity.
“Every automaker is at risk in some way here and, more importantly, has a critical supply chain already facing inflation, labor unrest, and affordability challenges,” says Cox Automotive Executive Analyst Erin Keating. “Tariffs across North America won’t just impact the ‘big guys,’ because there are countless small businesses in all three countries that have worked together for decades to produce some of the market’s most affordable vehicles.”
Cox Automotive owns Kelley Blue Book.
Other Tariffs Scheduled
Even if negotiations make these tariffs short-lived, automakers face at least three other possible levies. Trump has also promised new tariffs on aluminum and steel — the primary materials used in vehicle production. Those could take effect March 12.
He has threatened tariffs specific to the auto industry, as high as 25% on all imported cars but designed to “go substantially higher over the course of a year.” Those could begin on April 2.
He has threatened “reciprocal tariffs” on American trade partners, meaning the U.S. would match any tariff a country places on U.S. goods. Those have no specific effective date, as Trump asked White House officials to study the issue and make recommendations soon.