How 2025 Auto Tariffs Are Shaping the U.S. Car Market—and What It Means for You

Understanding the 2025 Auto Tariffs and Their Impact on Car Buyers

In early April 2025, a 25% tariff was imposed on all imported vehicles and auto parts entering the U.S., including those from Canada and Mexico. This policy shift has introduced significant changes to the automotive landscape, influencing vehicle prices, availability, and consumer choices.

New Car Market: Rising Prices and Limited Options

The immediate effect of these tariffs is a noticeable increase in new car prices. Analysts estimate that the average cost of a new vehicle could rise by $5,000 to $15,000, depending on the model and its reliance on imported parts.​

Brands heavily dependent on imports, such as Volvo, Mazda, Volkswagen, and Hyundai (including Genesis and Kia), are particularly affected, with over 60% of their U.S. sales in 2024 comprising imported vehicles. Even manufacturers with significant U.S. production are not immune, as many domestically assembled cars incorporate imported components.​

Luxury brands like Ferrari have already responded by increasing prices on certain models by up to 10%. Additionally, some automakers, including Audi and Aston Martin, have paused or reduced U.S. shipments to reassess their strategies.

Used Car Market: Increased Demand and Escalating Prices

As new car prices climb, many consumers are turning to the used car market, driving up demand and, consequently, prices. CarMax, a leading used car retailer, has reported a 7.5% increase in used-car sales revenue year-over-year, though earnings have been impacted by rising acquisition costs. ​

The surge in demand, coupled with a tight supply resulting from fewer leases and lower new car sales in previous years, is making it more challenging to find affordable used vehicles. Analysts predict that used car prices will continue to rise as long as the tariffs remain in effect.

Which Vehicle Segments Are Most and Least Affected?

Most Affected:

• Imported Vehicles: Cars manufactured outside the U.S. are directly impacted by the tariffs, leading to significant price increases.​

  The 25% tariffs on imported vehicles and parts are significantly impacting several popular models, particularly those manufactured outside the U.S.:​

  • Chevrolet Equinox: Assembled in San Luis Potosí, Mexico, this model is subject to the full tariff, leading to increased prices for consumers. ​

  • Ford Mustang Mach-E: Built in Cuautitlán Izcalli, Mexico, the Mustang Mach-E faces higher costs due to the tariffs, affecting its competitiveness in the EV market. ​

  • Toyota RAV4: Manufactured in Woodstock, Ontario, Canada, the RAV4 is impacted by the tariffs, resulting in price hikes for this popular SUV. ​

  • Honda HR-V: Produced in Celaya, Mexico, the HR-V is also subject to the tariffs, leading to increased costs for buyers. ​

  • Infiniti QX50 and QX55: Built in Aguascalientes, Mexico, these models have seen U.S. orders suspended due to the tariffs, with existing inventory being sold until depleted. ​​

• Luxury Brands: High-end vehicles, often imported, are seeing substantial price hikes, with some models increasing by up to 10%.​ These include, of course, the 3 main German luxury car manufacturers: Audi, BMW, and Mercedes-Benz.

• Some Electric Vehicles (EVs): Many EVs rely on imported components, making them susceptible to price increases due to the tariffs.

  Electric vehicles that are either imported entirely or rely heavily on imported components, especially from countries subject to high tariffs, are experiencing significant cost increases. Notable examples include:​

  • Ford Mustang Mach-E: Manufactured in Cuautitlán Izcalli, Mexico, this model is subject to the 25% tariff on imported vehicles, leading to higher prices for U.S. consumers. ​

  • Chrysler Pacifica Plug-In Hybrid: Assembled in Windsor, Ontario, Canada, it faces similar tariff-induced price hikes. ​

  • Vehicles with Chinese Components: Even EVs assembled in the U.S. can be affected if they rely on imported parts from China, such as lithium-ion batteries, which now face increased tariffs

Less Affected:

• Domestic Vehicles with High U.S. Content: Cars manufactured and assembled in the U.S. with predominantly domestic parts are less impacted, though they may still experience some price increases due to supply chain complexities.​

  Some of the most popular choices in this category are:

  • Ford F-150: Assembled in Dearborn, Michigan, and Claycomo, Missouri, the F-150 benefits from domestic production, reducing exposure to tariff-related price increases.​

  • Chevrolet Silverado: Built in Fort Wayne, Indiana, and Flint, Michigan, the Silverado's U.S.-based manufacturing helps shield it from the tariffs' effects.​

• Yet again, some EVs: Conversely, EVs that are manufactured in the U.S. with a higher percentage of domestically sourced components are less impacted by the tariffs. Examples include:​

  • Tesla Models (Model 3, Model Y, etc.): Produced in Fremont, California, and Austin, Texas, these vehicles benefit from domestic manufacturing, reducing exposure to import tariffs.​

  • Ford F-150 Lightning: Assembled in Dearborn, Michigan, this model's U.S.-based production helps shield it from tariff-related price increases. Wikipedia​

  • Rivian R1T: Built in Normal, Illinois, Rivian's electric pickup truck is less affected due to its domestic production. Wikipedia​

  • Volkswagen ID.4: Manufactured in Chattanooga, Tennessee, this model avoids tariffs associated with imported vehicles.

• Older Used Cars: Vehicles already in circulation are not directly affected by the tariffs, though increased demand may drive up their market value.​​

Navigating the Current Market: A Practical Approach

Given the current market dynamics, purchasing a new or even a used car can be more expensive than in previous years. With prices on the rise and inventory tightening, it may be prudent to hold onto your current vehicle for a bit longer.​

Investing in regular maintenance and timely repairs can extend the life of your car, allowing you to avoid the inflated prices in the current market. Utilizing tools like our Maintenance Cost Estimator can help you budget effectively and make informed decisions about your vehicle's upkeep.​

Final Thoughts

The 2025 auto tariffs have introduced a complex set of challenges for car buyers in the U.S. With new and used car prices escalating, and inventory becoming more limited, maintaining your current vehicle may be the most cost-effective strategy in the short term.​

Stay informed about market trends, and consider leveraging our suite of calculators & articles to navigate this evolving landscape with confidence.

Image by Motortrend.