As rolled out on 3rd April, President Donald Trump imposed 25% tariffs on imported vehicles, and this news has been sending shockwaves through the global automotive industry. Even after easing some of the trade levies, these tariffs, along with the looming 25% duties on auto parts, are set to be in motion from 3rd May. This decision is set to reshape how cars are made and sold. All vehicle manufacturers should buckle up, because the road ahead sure looks bumpy.
Analysts are expecting millions fewer vehicles sold, sky-high prices for new and used cars, and a staggering $100 billion-plus hit to the industry. “This isn’t just a speed bump—it’s a structural earthquake,” says Felix Stellmaszek, global automotive lead at Boston Consulting Group. “2025 could go down as the most pivotal year in auto industry history, forcing a complete rethink of where and how cars are built.”
According to BCG, these tariffs could result in an extra $110 billion to $160 billion in annual costs on the industry, which will potentially eat up 20% of U.S. new-vehicle revenue. The Center for Automotive Research forecasts the damage at a whopping $107.7 billion for U.S. automakers alone, with Detroit’s Big Three- GM, Ford, and Stellantis- facing a $41.9 billion blow alone.
The Looming Impact on Consumers and the Market
Automakers are caught up in a bubble. While some may try to absorb a portion of the costs, most of them will likely pass them on to consumers, driving up sticker prices. Mark Delaney, a Goldman Sachs analyst, predicts that new vehicle prices could jump from $2,000 to $4,000 within the next few months. Jonathan Smoke, Cox Automotive’s Chief Economist, forecasts an even grimmer state of a $6,000 spike for imported vehicles and a $3,600 hike for U.S.-assembled cars due to costlier parts, plus $300–$500 more from earlier steel and aluminum tariffs.
Affordability has reached a breaking point with new vehicles already averaging a wallet-draining $50,000 (before financing). According to Cox Automotive, auto loan rates remain stuck at punishing levels- 9.64% for new cars and nearly 15% for used ones. Add in tariffs,and the dreams of consumers buying a new ride could slip further out of reach. “We’re looking at shrinking discounts, rapid price hikes, and tighter supply,” Smoke warned. “Long term, production and sales will tank, used car prices will climb, and some models might vanish entirely.”
With Telemetry’s Sam Abuelsamid predicting a two-million-unit drop in annual U.S. and Canadian vehicle sales, the fallout could ripple across the economy. The consumer spending power will be dented, not just for cars, but for everything. “This isn’t just about cars,” he says. “It’s about how much money people have left to spend.”
Looking Forward
Carmakers are working in survival mode. Domestic heavyweights such as Ford and Stellantis are rolling out employee pricing deals to soften the blow, while Jaguar Land Rover has paused U.S. shipments. Hyundai is going with a different tactic, freezing prices for at least two months to keep buyers calm. Most automakers have a roughly two-month buffer of pre-tariff inventory, but once that’s gone, price hikes are inevitable for the consumer.
As tariffs rewrite the rules of the auto industry, consumers and automakers are in for a turbulent ride. Higher costs, fewer choices, and a broader economic chill are looming on the horizon. For an industry that is already grappling with inflation and supply chain woes, Trump’s tariffs are like flooring the gas on a road full of potholes. Will automakers and buyers find a way to navigate within the chaos? Only time will tell, but one thing’s for sure: the auto market is in for a historic shake-up.
