Car Prices Are Poised for $12,000 Surge on Trump’s New Tariffs

By Keith Naughton

Mar 3, 2025 (Bloomberg) –Impending tariffs on Canada and Mexico risk driving up US car prices by as much as $12,000, further squeezing consumers and wreaking havoc across the intricate web of automotive supply lines spanning the continent.

The cost to build a crossover utility vehicle will rise by at least $4,000, while the increase would be three times that for an electric vehicle examined in a new study from Anderson Economic Group, an automotive consultant in East Lansing, Michigan. And those costs would likely be passed on to consumers, the study found.

“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, said in an interview.

Read More: Even Some High-Income Americans Can’t Afford New Cars Anymore

Tariffs of 25% on imports from Canada and Mexico threaten to exacerbate an automotive affordability crisis that is already driving buyers out of the market. Even before the duties, sticker prices were approaching $50,000 on average, up more than 20% from five years ago. The situation also calls into question Trump’s campaign promises to stem inflation as consumer confidence falls to a four-year low on fears over the impact of his import taxes.

After a month’s reprieve, President Donald Trump said last week that the levies on the top US trading partners will take effect on March 4. The vow brushed aside industry leaders who’ve warned that measures will cause severe damage to industry sales, profits and employment. They’ll also affect some of the industry’s most recognizable and best-selling models, such as the Chevrolet Silverado pickup and Ford Bronco Sport SUV. 

Top executives from General Motors Co., Ford Motor Co. and Chrysler-parent Stellantis NV last week spoke in a Zoom meeting with the Commerce Department to warn of the dire economic consequences of the proposed tariffs, according to people familiar with the matter. During the meeting, Ford and Stellantis executives stressed that the White House should focus instead on the millions of imported vehicles with no US parts content, one of the people said. The Detroit News earlier reported the meeting.

Read More: Ford’s CEO to Warn Lawmakers of ‘Devastating’ Tariff Impact

Consumers may find some vehicles vanish altogether as automakers stop producing models squeezed especially hard. And even if the tariffs prove to be short-lived, carmakers are already taking steps to contain the fallout.

Anderson Economic Group’s analysis estimated how a 25% tariff on Mexico and Canada and a 10% levy on imports from China would raise the cost of specific models made in North America, which it did not identify. A large SUV with “significant” content from Mexico would see a nearly $9,000 increase, while a pickup would see an $8,000 increase, the study found.

“Tariffs on the scale that President Trump has threatened would have a sharp negative effect on auto sales,” Anderson said.

Fewer Models

Car sales are already falling as consumers grapple with high prices and borrowing costs. A decline in January sales dragged down a broader measure of inflation-adjusted consumer spending by the most in nearly four years, according to government data out Friday.

Dan Hearsch, leader of the Americas automotive practice at consultant AlixPartners, said US auto sales could drop by half a million vehicles, even under the less severe price hikes he anticipates. That’s because automakers will stop producing certain models in Canada and Mexico and move as much production as possible to their US factories.

“Some of those vehicles that can’t be produced in the US just probably won’t be made for a while,” Hearsch said in an interview.

Ford, for example, only builds its popular Maverick small pickup truck, Bronco Sport compact SUV and electric Mustang Mach-e in Mexico. Ford CEO Jim Farley warned in February that a 25% tariff on Mexico and Canada “will blow a hole in the US industry that we have never seen.”

GM produces its full-size Chevrolet Silverado pickups in Mexico, Canada and the US, while Stellantis makes Ram pickups in Mexico and the US. Those automakers may relocate some of that output domestically, Anderson said. But they likely will have to stop selling some versions of those trucks made in Canada and Mexico.

“You’ll see some model and trim types just disappear,” Anderson said. 

Countermeasures

Trump proposed the Canada and Mexico tariffs to stem the flow of undocumented immigrants and illegal drugs into the US. That has fueled hopes in the industry that the measures will be temporary if the US allies can show enough progress to satisfy the president. 

“The expectation is that — at worst — they’re around for a couple months and, at best, they keep getting pushed” off, said Hearsch, who is in regular consultation with automotive leaders. “Those are not intended as trade actions. Those are border security negotiations.”

In the meantime, auto companies are stockpiling supplies to cushion the blow. Ford’s engine plant in Windsor, Ontario, is racing product over the US-Canada border in anticipation of the tariffs, said local union representative John D’Agnolo. The company has spent the past month securing warehouse space in the US to store finished engines and parts.

“We usually store them here 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.”

Automakers are also pushing their suppliers to build up parts inventory and move them quickly to US warehouses “so that we can at least create a buffer,” Hearsch said.

It’s difficult to quantify the precise impact on automaker profits until the tariffs are enacted. But the potential blow is immense, considering the industry struggles to maintain single-digit profit margins and is losing billions on its new electric vehicle model lines.

It’s all that automotive executives are talking about right now, according to Hearsch. Long-term planning issues have been moved to the back burner while car bosses try to prepare for the tariff fires on the horizon.

“It’s got everybody in an absolute spin,” said Hearsch.

© 2025 Bloomberg L.P.

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