Cox Automotive Senior Economist Charlie Chesbrough told CU Times late Thursday that Trump’s tariff proclamation has "sent shockwaves across the marketplace.”

“Tariffs have been threatened and delayed multiple times over recent months, but it now seems nearly certain that a 25% tariff on 50% of the market is happening next week,” Chesbrough said.

Cox Automotive said Wednesday that the tariffs on Canada and Mexico alone would raise costs by $3,000 for a U.S.-made vehicle and by $6,000 or more for one made in Canada or Mexico. Chesbrough said Thursday the global tariffs will raise prices by “thousands of dollars on almost all vehicles.”

One result, paradoxically, is that Cox Automotive now thinks its March forecast of a new car sales pace of a seasonally adjusted annual rate of 15.9 million vehicles is too low.

“Many folks who were thinking of buying a vehicle are now rushing to buy before the end of the month,” Chesbrough said. “There are also many potential buyers who have been leaving the market over fears of a worsening economy, but yesterday’s comments will likely overpower those with many more pull-ahead buyers these next few days.”

“I expect we’ll see relatively strong sales activity for a month or two, but prices will rise, and sales will slow noticeably before the end of Q2,” he said. “Dealers and OEMs will be pulling back on incentives immediately as the rush to sell existing inventory declines.”

“The value of an unsold vehicle on a dealer’s lot is now worth X% more since its replacement cost will be much higher.  And, future supply availability may be vulnerable, so motivation to sell may be changing as well, and it is moving away from the buyer’s favor.”

Edmunds, a consumer-oriented automotive analysis company based in Santa Monica, Calif., also predicted after Trump’s tariffs announcement that manufacturers would raise car prices as they struggle with higher costs.

Jessica Caldwell, Edmunds’ head of insights, said those costs would be passed along to consumers unless manufacturers find innovative ways to offset them, “including the possibility of dipping into their profit margins.”

“It’s reasonable to expect that vehicle prices will rise, which presents an added challenge to an industry that is already grappling with ongoing affordability concerns," Caldwell said.

The average transaction price in February for new vehicles was $47,373 and their average manufacturer’s suggested retail price (MSRP) was $49,350, making the average discount for new vehicles $1,977. The average transaction price for used vehicles was $25,005.

“With added cost pressures, automakers may pull back on incentives, which could make it more difficult for some consumers to find affordable options,” she said.

Caldwell said tariffs might bring long-term benefits by encouraging increased investment in U.S.-based manufacturing. “Over time, this may contribute to a more resilient and locally rooted auto industry,” she said.

Those arguments have been touted by Trump and others, including the UAW.

This industrial policy would require a massive shift of billions of dollars of investments in assembly and parts plants, and assumes Americans would be willing to pay for the resulting higher costs. Manufacturers would only make such bets if they were to believe the one-term president’s pronouncements would last much longer than the three years and nine months remaining in Trump’s term.

Trump’s recent tactical moves with Canada and Mexico have suggested his proclamations might have an even shorter shelf life. To wit, Trump:

• Announced tariffs on Canada and Mexico Feb. 1;
• Delayed said tariffs on Feb. 3;
• Resumed those tariffs on March 4; and
• Paused the tariffs March 5 for one month.

“And if the trade war escalates and a recession starts in the fourth quarter, we would see a further decline to 15.3 million on the downside this year and even lower sales next year,” Smoke said.

Contact Jim DuPlessis at [email protected].