President Trump has announced a 25% tariff on all cars built outside the United States and on many parts used in cars built here.
Effective Dates:
- Imported Cars: Tariffs start on April 3.
- Car Parts: Tariffs start on May 3.
These tariffs will increase car prices. To save money, consider locking in a new car deal before any potential price increases take effect.
Can You Avoid a Car Tariff?
No vehicle made at an assembly plant in the United States is 100% made here. Even Tesla sources its parts from other countries. This means that with tariffs, car prices will increase for American car buyers, though the timing remains unclear. You can potentially avoid paying a tariff on a new car by purchasing one that was imported to the U.S. before the tariffs took effect, or by buying a used car.
How Will Tariffs Affect Car Buying?
If new cars become too expensive, used cars will become more attractive. However, if demand spikes, used car prices may also increase. Here’s more information:
- New cars: Shoppers can expect the tariffs to increase car prices by as much as $6,000 on vehicles priced under $40,000. Higher car prices mean higher car taxes, financing, car insurance, and other ownership costs. This price pressure will make cars less affordable for consumers.
- Used Cars: Tariffs do not directly affect previously owned cars. However, they will affect car buying. Already, shoppers see fewer used cars available in the marketplace because manufacturers made 8 million fewer vehicles during the COVID-19 pandemic, creating a tight inventory environment. As a result, consumers may want to act fast to buy a used vehicle. The reason: Would-be new car buyers looking to avoid tariff increases could flood the used car market, similar to what happened during the pandemic.
How Will Tariffs Impact the Value of Cars?
With tariffs, we are in all-new territory. Consider that tariffs levied on new cars don’t equal added value to your vehicle. The value of the car is the value of the car. The tariff cost typically ends up as a fee or markup to consumers buying new cars.
However, tariffs will likely impact the value of the car sitting in your driveway due to the laws of supply and demand. Less supply means more demand since inventory for used cars is already tight. This can be both good news and bad.
For example, trading in or selling your car could be good because you may get more for your vehicle. However, it’s not good when maintaining your vehicle and considering your car insurance rates may skyrocket even further. Most car parts used in auto repairs are imported, often from Canada or Mexico. That will inflate car repair costs and, with it, insurance rates.
Which Cars Are Impacted the Most and Least?
It’s too early to tell how exactly tariffs will affect each car model. Vehicles assembled in the United States may use parts that cross borders several times before final assembly. By final assembly point, see below a breakdown of models by sales and how a carmaker may be exposed.
| Sales Rank | Model | Country of Origin | Final assembly |
| 1 | Ford F-Series | United States | Michigan; Missouri |
| 2 | Chevrolet Silverado | United States | Indiana; Ontario |
| 3 | Toyota RAV4 | United States, Canada, Japan | Kentucky; Ontario; Japan |
| 4 | Honda CR-V | United States, Canada | Indiana; Ontario |
| 5 | Tesla Model Y | United States | California; Texas |
| 6 | Ram trucks | United States; (engine: Mexico, transmission: U.S. | Michigan |
| 7 | GMC Sierra | United States, Mexico (engine U.S.; transmission U.S.) | Indiana; Mexico |
| 8 | Toyota Camry | United States | Kentucky |
| 9 | Chevrolet Equinox | Mexico (engine, Mexico; transmission, Mexico) | Mexico |
| 10 | Honda Civic | United States, Canada | Indiana; Canada |
Will Tariffs Affect Insurance Rates and Replacement Car Parts?
Yes, tariffs are likely to impact car insurance rates because a 25% tax will be applied to many car parts. Since many of these parts are imported from other countries, the increased costs could affect insurance premiums. Since this situation is still developing and those tariffs don’t go into effect until May 3, stay tuned for more information.
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