Hurry up if you want to buy a new car: This is how Trump’s tariffs may affect vehicle prices

Donald Trump has made no bones about the fact that his favourite word in the modern lexicon is ‘tariffs’, and he seems hell-bent on imposing them on various countries trying to trade peacefully with the United States.

Earlier this month, the President announced that a 25% tariff on Mexican and Canadian goods (except energy imports from Canada, which were hit with 10% tariffs), causing chaos throughout the motor industry. This was later postponed by Trump to ‘protect American car manufacturers and American farmers’, but the worry remains.

What nobody seems to have told him is that in order for the buying companies in the US to keep up their agreements, prices on the US side of the border need to be increased to cover the extra costs, meaning that the tariffs are, in effect, being paid by the customer.

Tariffs ‘would blow a hole in the US’ says Ford CEO

In terms of the automobile industry, as hinted, the idea of tariffs seems particularly worrying, as a hefty jump of 25% is being readied by the US on all imports on motor vehicles, potentially adding thousands of dollars to the cost of cars, even those built in the States. “Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the US industry that we’ve never seen,” Ford CEO Jim Farley told investors.

“If the administration moves forward with a 25% tariff on all auto imports, car shoppers should get ready for some sticker shock at dealerships,” David Greene, an industry analyst at Cars.com, told CNN.

What’s more, if the supply of cars imported to US dealerships slows down or stops completely due to countries' reactions from the US-imposed tariffs, the supply of cars available would be hugely limited for US buyers. This in turn would, due to the basic economics of supply and demand, likely lead to an increase in prices, even for US-built vehicles.

Such a decision from Trump could even raise prices for used cars: “if new car prices increase, more buyers will shift toward used vehicles, and as demand rises, so will prices,” Greene added. For context, this is exactly what happened when the chip shortage coming out of the recession limited new car supplies and drove up prices across the industry.

When it comes to the automobile industry, most automakers that have US plants also share the workload across Mexico and Canada. Tariffs would slow down the connections between the three countries, causing unrest and a situation of uncertainty between the previously harmonious nations.

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Trump himself claims that tariffs will ignite the US motor industry, which is might, but not in a positive way. Even the most ‘American’ cars, like the Ford F-150 pickup, get less than 50% of its parts from the States. US automobile production has been on the steady decline for years, with a more globalist perspective taking hold and making things easier for everyone across the globe. It seems that Donald Trump wants to go the other way, and we’re all paying for it.

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