Tariff Impact on the Auto Industry: Rising Costs and Potential Delays

On March 3, 2025, tariffs enacted by the Trump administration took effect, imposing a 25% fee on all Mexican and Canadian exports and an additional 10% on Chinese goods. However, as of March 5, the White House announced a 30-day pause on tariffs specifically for the auto industry. This temporary hold applies to vehicles complying with the United States-Mexico-Canada Agreement (USMCA), including those produced by Ford, GM, and Stellantis. These three automakers expressed gratitude for the 30 day exemption – however this doesn’t mean they are in the clear.

The delay on tariffs raises concerns about the federal government’s push to shift production to the U.S., with some analysts questioning its feasibility. If the tariffs ultimately take effect on vehicle imports in April, automakers are expected to face higher costs, which could be passed on to consumers.

When it comes to car parts, even U.S.-made vehicles rely on components from Canada and Mexico. This dependency could lead to higher part costs and production delays. As Kelley Blue Book explains, “A part will see its price increase every time it crosses a border. That means many cars will see their prices rise by more than 25%. Mexico and Canada may retaliate with matching tariffs, doubling the impact.” With that being said, auto dealers may expect new vehicle prices to rise significantly, prompting potential buyers to act sooner rather than later. Additionally, auto dealers can also anticipate a rise in demand for used cars, leading to higher prices as more buyers turn to pre-owned vehicles instead of new ones.