By Paul R. La Monica

President Donald Trump's plan to slap a 25% tariff on imported automobiles puts consumers looking to buy a new vehicle in a tough spot.

The tariffs, set to kick on in April 2, are likely to raise prices for many new cars -- whether they're assembled in the U.S. or not. That's because the administration will also impose tariffs on parts made outside of the U.S.

The news is already having a negative impact on shares of General Motors, Toyota Motor, Volkswagen, Ford Motor, and the rest of the world's biggest makers of cars and trucks.

With that in mind, here are some questions -- and answers -- for anyone in the market for a new car and looking for advice.

First Off, What Are Auto Tariffs? And Why is Trump Imposing Them?

Tariffs are duties on goods imported from other countries. The cost of the duty is often paid by consumers in the form of price increases and thus is often called a tax.

While tariffs can be a source of revenue, they can also be a way to influence business decisions and consumer behavior. In the case of Trump's auto tariffs, the White House says they "will protect and strengthen the U.S. automotive sector."

So How Much Will Car Prices Rise?

That depends on how willing auto makers are to eat some of the expenses from higher tariffs as opposed to passing off a chunk -- or all -- of those costs to consumers.

Analysts at Bank of America said prices could increase by $10,000 for vehicles affected the most by tariffs if auto makers passed on all the costs to consumers. "However, we don't expect consumers would absorb the price increase in full," the BofA analysts added, noting that auto importers "are more likely to sell vehicles at break-even" until they make changes to where they produce vehicles. Even so, that scenario could lead to a "meaningful" price increase of $4,500, BofA said.

Keep in mind that some cars and parts for domestic manufacturers GM and Ford are made outside the U.S. So even if consumers want to "buy American," UBS analysts estimated that the price of GM and Ford models could rise by $4,000 to $5,000 and that auto makers will reduce incentives at dealerships.

Ilhan Geckil, managing director of strategy and valuation with Anderson Economic Group, told Barron's that price hikes will probably be larger for SUVs than sedans and warned that auto companies face Trump's tariffs on steel and aluminum too, which could boost prices further.

Brian Moody, executive editor for Kelley Blue Book, the automotive pricing guide, said tariffs aren't the only factor behind auto prices. "It's dangerous to look at prices in a vacuum. You have to layer on demand and availability," he said.

In other words, auto makers may not boost prices on models that have abundant inventory. Cars and trucks that are more scarce could see even higher prices.

Which Companies Make Cars in the U.S. and Which Ones Don't? And What Models Face the Biggest Hits?

It all comes down to being about which cars are made in America, not necessarily which cars are made by American companies.

Cars.com publishes an annual American-Made Index that looks at where vehicles are built and parts are sourced. Cars.com said that Ford and Stellantis rank higher as American made car companies, with 72.4% and 66.8% of assembly in the U.S. GM, on the other hand, had less than half of production last year in America. Despite that, GM had 16 U.S.-made cars on the list, the most of any auto maker.

But it pays to look deeper at individual models. For example, consumers may want to avoid Ford's Maverick, Bronco Sport, and Mustang Mach-E, which Cars.com said are assembled in Mexico. GM's Encore GX and Envista, built in South Korea, could also be hit by more tariffs.

Looking at the top of the rankings, Tesla's Model Y leads the list and two other models from Elon Musk's EV giant are in the top 10: the Model S and Model X.

The Honda Passport, assembled in Lincoln, Ala., ranks No. 2 on the list. Two other Honda models, the Odyssey and Ridgeline, are also manufactured there.

Volkswagen's ID.4 electric SUV is made in Chattanooga, Tenn., while the Toyota Camry is made in Georgetown, Ky.

Geckil and Moody both noted that Nissan has a big manufacturing presence in Tennessee as well.

Should You Buy a New Car Before Tariffs Hit?

Yes. If you are thinking of buying a new car soon, time is of the essence.

"It's not too late. I wouldn't rush into a major purchase based just on the new headlines. But if you were already in the market, maybe speed up the process a bit," said Kelley Blue Book's Moody.

Getting a deal done may be difficult given that the tariffs are set to take effect in just a few days. One possible workaround? Buy a new car that is already at the dealership.

"Cars on dealer lots right now won't see their sticker prices change," said analysts at automotive research firm Edmunds in a report in early March.

Anderson's Geckil said that many auto makers tried to get ahead of tariffs and preordered some new vehicles. But once those cars and trucks are off the lot, auto makers could boost prices relatively quickly. "We don't expect immediate price hikes, but you'll probably see them within a month or so," he said.

Higher prices are likely to lead to lower demand for new vehicles. Analysts at Cox Automotive, which owns Kelley Blue Book, cut their 2025 new-car sales forecast Wednesday from 16.3 million vehicles to 15.6 million, citing "economic uncertainty, affordability, and potential tariff impacts slowing new-vehicle sales."

OK. And Won't You Get to Deduct Interest on a New-Car Loan?

President Trump has repeatedly said that would be the case -- but only for cars made in the U.S. So it isn't clear which vehicles will be eligible.

It's also not clear whether a tax break, which would need to be approved by Congress, will benefit most consumers since it will only be available to those who don't take a standard deduction. Typically, wealthier Americans file for itemized deductions while many lower-income and middle-class people tend to file for the standard deduction.

According to data from the Tax Policy Center, only a little more than 10% of taxpayers with adjusted gross income $(AGI)$ between $50,000 and $100,000 itemize their deductions, compared with about two-thirds of returns from people with an AGI above $500,000.

What About the Cost of Repairing Cars?

The price of doing so will most likely rise, too. It's hard to imagine a scenario where your local mechanic won't charge more to fix a broken bumper or fender if they have to buy an imported part that was subject to tariffs or switch to a higher-priced American-made one instead.

"Mechanics may have to find more costly domestic alternatives or wait longer for items to arrive if fewer parts are imported because of financial constraints," said Xavier Sabastian, a team lead at Way.com, a website and app focused on services for car owners, in a blog post. Sabastian added that shops also "may bill extra for their time and skills because they now have to deal with more expensive parts and delays."

So it may pay to get any fixes done sooner rather than later.

"Repair costs will probably go up because of so many parts coming from China. If you've been putting off any work on your car, you should do that as well," said Joseph Yoon, a consumer insights analyst at Edmunds.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 27, 2025 14:47 ET (18:47 GMT)

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