How U.S. Tariffs on Canada and Mexico Could Affect New Car Prices | GearJunkie

Mar 07, 2025

Earlier this week, U.S. President Donald Trump enacted new 25% tariffs against Canada and Mexico — while also increasing previous duties targeting China. While Trump subsequently decided to delay enacting the new duties against automobiles and auto parts for a month, virtually every vehicle on the market could see a significant increase in cost if a resolution to the trade dispute isn’t found quickly. Prices on many new vehicle models could rise by as much as $12,000, according to one study.

In a controversial move pitting the U.S. against its two closest neighbors — and top trading partners — Donald Trump enacted 25% tariffs against Canada and Mexico this week. He also upped the duties previously targeting the country’s third-largest trade partner, China.

The trade war will impact a wide range of goods, from avocados to smartphones — driving up the price of the average Apple iPhone by around $200. But few sectors of the economy will be hit as hard as hard as the auto industry.

On the positive side, Trump agreed to delay the tariffs covering automobiles and auto parts for a month after a conference call with the CEOs of General Motors, Ford, and Stellantis. However, with few signs that this economic war will end quickly, auto buyers could soon count themselves as collateral damage.

Dozens of vehicles — including some of the most popular models on the market, like the Chevrolet Silverado 1500 and Toyota RAV4 — come into the U.S. from Canadian and Mexican assembly plants. According to a new study by Michigan-based Anderson Economic Group, these vehicle prices could jump by as much as $12,000.

And, noted the study, even vehicles assembled in the U.S. will see sticker prices surge because they typically use a wide range of Canadian, Mexican, and Chinese parts and components. There’s also the possibility that some basic, budget-friendly vehicles could be driven off the market, should they see price increases beyond buyers’ budgets.

Inflation was a key issue during the 2024 presidential election. But if you found buying eggs painful, consider what we’ve seen in the automotive market in recent years.

Since the U.S. new vehicle sales hit a 17.5 million peak in 2016, data from Cox Automotive shows there’s been a nearly 40% increase in average transaction prices (ATPs) — what buyers actually pay after factoring in MSRPs, options, and incentives. In January 2025, ATPs hit a near-record $48,641.

That was slightly below the all-time high, largely because of rising incentives such as cash givebacks and subsidized leases and loans. However, the upward trend has barely slowed and is set to take a big jump a month from now if the automotive tariffs are implemented.

The vehicles produced in our two neighboring nations cover a wide range of market segments and prices. But, even entry-level imports, such as the Hyundai Accent, could jump by as much $4,000. High-line products, such as the Audi Q5 and the Chevy Silverado, could see prices rise three times as much.

Around three dozen different nameplates sold in the U.S. are assembled in Canada and Mexico, many of them bestsellers. The most significant models include:

But it’s not just imported products that will face price hikes should automotive tariffs be enacted in April. Even for those models assembled in the U.S., noted the Anderson report, prices still could rise hundreds, even thousands, of dollars. That’s because it’s rare to impossible to find any vehicle sold in the States not fitted with at least some Canadian, Mexican, and/or Chinese parts.

With its cheap labor rates, Mexico has become a production center for many of the U.S. market’s lowest-priced offerings, models such as:

These models are especially price sensitive, said Sam Abuelsamid, lead auto analyst with Telemetry Research. Even modest price hikes could drive potential buyers out of the market — or send them switching over to used alternatives. That’s already happened with many traditional new vehicle buyers who’ve migrated to “nearly new” options, such as certified off-lease vehicles offering like-new warranties.

There’s also the possibility that some manufacturers might respond by pulling entry models off the market should tariffs reduce sales volumes too sharply, industry watchers have warned.

There’s little doubt, economists warn, that buyers will take tariff price hikes in stride. After all, they’ve even cut back on buying eggs. The concern is that anything beyond a minor hit to vehicle sales could impact the broader economy.

The tariffs threaten to “blow a hole in the U.S. industry,” Ford CEO Jim Farley warned in February.

But the impact wouldn’t stop there, Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers’ Association, added this week. Tariffs on automotive parts and vehicles would likely lead to plant closings and job losses for “hundreds of thousands of (North) American autoworkers.”

And that could set the economies of all three neighboring nations into a tailspin.

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