Car Prices About to Surge as Much as $12K

President Trump’s tariffs on auto imports is about to cause all car prices in the U.S., even if the vehicle is produced domestically, to rise between $3,500 and $12,000, CNN reports. The increases are likely to come within a few weeks after the 25% tariffs go into effect on April 3.

That’s because the one-in -two cars sold in the U.S. that are manufactured here import a significant amount of components, primarily from Canada and Mexico.

There’s no such thing as an all-American car, as even the Trump administration concedes.

“The average domestic content is conservatively estimated at only 50% and is likely closer to 40%,” according to a Trump administration fact sheet published Wednesday.

By some estimates, a $40,000 American car could be hit with a $5,000 levy. Anderson Economic Group, a Michigan think tank, estimates car costs will rise between $3,500 to $12,000.

“There’s probably not a vehicle on the market today that wouldn’t be affected in some form or fashion by tariffs,” said Peter Nagle, an automotive economist with S&P Global Mobility. “I would think prices would start to change in the one-to-two weeks after the tariffs go into effect.”

Edmunds.com Director of Insights Ivan Drury, agrees: “It’s going to be expensive. It’s too soon to tell how much, but it’ll be a couple of thousands of dollars, if not more.”

Automotive industry experts do not expect automakers will necessarily pass all of their higher costs to dealers on the sticker price — but via incentives that car shoppers are used to seeing.

Automakers “can simply remove some incentives that are quite lucrative,” Drury said.

For instance, carmakers might drop a 1.9% subsidized car loan, raising the cost of purchasing the vehicle by $6,000 or $7,000, Drury said.

If car shoppers think they will be able to negotiate favorable terms at a dealership now, they could be in for a surprise, Drury continued. The uncertainty over the tariffs will likely put production on hold.

“The current inventory on the dealers’ lots just went up in value,” Drury said.

If the cut in inventory plays out anything like it did during the COVID pandemic — when a shortage in computer chips affected the prices of new and used cars alike — this will be yet another factor driving up car prices.

In 2021, new cars jumped 17% in price, while used cars surged by 32%, according to Edmunds’ data.

“If the tariffs go through, by mid-April, we expect disruptions [to] virtually all North American vehicle production amounting to 20,000 fewer vehicles produced per day, which is about a 30% hit to production,” said Jonathan Smoke, chief economist for Cox Automotive.

“Bottom line: lower production, tighter supply, and higher prices are around the corner, reminiscent of 2021,” Smoke continued. “April 3 seems a bit like a doomsday if those tariffs on Mexico and Canada go through.”

Last year, 10.2 million cars were built in U.S. factories.