ORLANDO, Fla. — When proposed tariffs kick in April 2, affordable vehicles will become harder to find.
Not only are nearly half of vehicles sold subject to tariffs on Canada and Mexico, but tariffs also affect nearly half the most affordable vehicles, Jonathan Smoke, chief economist at Cox Automotive, said on March 18 during a panel at CBA Live 2025.
“If you apply a 17% cost increase due to tariffs, you effectively eliminate vehicles priced under $30,000,” Smoke said. “Remember when we wept over $20,000 no longer existing or being very few and far between? This would push us to that place.”
However, Smoke said that tariffs alone were unlikely to set off inflation.
“There’s a lot of concern about inflation, but economic theory is not clear that tariffs implemented will cause another round of inflation,” Smoke said. “Most of the data suggests a one-time price change, which builds upon itself.”
Supply chain challenges
Steel and aluminum tariffs are already in effect, while potential tariffs on Canada and Mexico loom.
The auto industry’s reliance on cross-border supply chains means components can cross borders up to six times before final assembly, Smoke said. Therefore, beyond rising costs, logistics pose an immediate challenge.
There is “no existing capacity at Customs and Border Protection to inspect, assess and put tariffs on these vehicles,” Smoke said. “You’re likely to see things freeze up almost overnight in the market.”
New-vehicle prices up 1%
Despite the turmoil, the used-vehicle market has seen little effect so far, with dealers remaining disciplined with inventory, Smoke said. But new-vehicle listing prices began rising in March as tariff concerns set in, he said.
The new-vehicle average transaction price rose 1% year over year in February to $48,039, according to the latest data from Kelley Blue Book.
“We haven’t seen a tariff-related impact on the [used] listing values so far this year,” Smoke said. “We are starting to see, in March, new-vehicle listing prices go up, ever since this is looking more and more real for April 2.”
Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information. Early-bird registration is available here.
