How Tariffs Could Impact the Car Market

Proposed tariffs on imported goods could significantly impact the car market, with ripple effects on prices, availability, and the cost of maintenance. Here’s an in-depth look at how these changes could affect car buyers and the automotive industry.

Tariffs and Domestic Manufacturing

Tariffs on imported goods, including vehicles and parts, are designed to incentivize domestic production. For example, a proposed 60% tariff on goods from certain countries and 10-20% tariffs on imports from others aim to encourage manufacturers to relocate production to the United States. Higher tariffs would mean higher costs for imported vehicles, making American-made cars potentially more attractive to consumers.

However, even cars assembled in the U.S. could be affected. On average, only 55% of a car’s components are made domestically, meaning tariffs on imported parts could still increase production costs. These expenses would likely be passed on to consumers, raising prices across the board.

Lessons from Other Industries

Tariffs on non-automotive goods have demonstrated how this strategy can play out. In one case, tariffs on imported washing machines increased prices for both imported and American-made models. While these tariffs did lead to some domestic manufacturing jobs, the cost to consumers far outweighed the benefits. The automotive market could face a similar outcome, with increased costs impacting buyers of all types of vehicles.

The Effect on Car Prices

If tariffs on imported vehicles and parts are enacted, car prices are expected to rise. Several factors will determine the extent of these increases:

Vehicle Origin: Cars assembled abroad and those with significant imported components would see the highest price hikes.

Profit Margins: Manufacturers may adjust their pricing strategies based on a vehicle’s market segment and profitability.

Used Car Market: Higher new car prices typically drive up demand for used cars, causing their prices to rise as well.

Additionally, the cost of maintaining and repairing vehicles could increase, as many components, such as electronics and brake pads, are imported.

Navigating a Changing Market

For car buyers, timing is key. If you’re planning to purchase a vehicle in the next few years, it may be wise to consider buying sooner rather than later, as potential tariffs could drive up prices across the board.

Learn More About the Car Market

Aubrey Janik, the creator of this video, provides expert insights to help consumers navigate these changes. With over 11 years of experience on YouTube, Aubrey covers everything from buying and maintaining vehicles to starting car-sharing side hustles. You can explore her resources, including the car-sharing and car-buying masterclasses, on her website: The Car Sharing Masterclass.

For additional content, follow Aubrey on Instagram at @aubrey.janik and check out her YouTube channel.