New Auto Tariffs Are Now in Place, Driving the Industry into Uncharted Territory

It’s on! As our Chief Economist Jonathan Smoke feared, the “unthinkable” has happened. New automotive-specific tariffs of 25% on all imported vehicles are now in place. Finished automobiles are no longer flowing freely across North America, and key automotive free trade agreements have been scrapped. This significant shift in the automotive landscape is already creating a ripple effect that will impact sales, inventory, pricing and manufacturing. Here’s what to consider and what the Cox Automotive Economic and Industry Insights team is watching closely:

Sales

Initial industry estimates suggest the month of March ended with a surge in new-vehicle sales driven by consumers jumping in before new tariffs begin to push prices higher. New-vehicle sales in March are estimated by our team at 1.59 million units sold, significantly exceeding the Cox Automotive forecast and the best month for sales volume in four years. Our team had expected volume in March to be 1.43 million, a decline from 2024 levels. Volume was higher by nearly 11% year-over-year and a remarkable 30% from February. Clearly, in the short term at least, shoppers have embraced a “better buy now” attitude, betting on higher prices later this year.

The seasonally adjusted annual rate (SAAR) of sales in March is now initially estimated at 17.8 million, the highest SAAR in four years as well and nearly 2 million units higher than the Cox Automotive forecast of 15.9 million. The retail SAAR was at 15.2 million, up 20% year over year.

Following President Trump’s executive order, the market experienced a significant shift as consumers responded with increased urgency, resulting in higher shopping traffic and sales activity. Shopping traffic on Cox Automotive’s Kelley Blue Book and Autotrader websites surged, with activity rising by 30% in the final days of March compared to the year-to-date average daily traffic.

Our team expects strong sales until “pre-tariff inventory” declines, although every automaker and dealer is approaching this situation differently. Some automakers are already moving forward with sales and discounts or offering price assurance programs, while others have already scheduled production stoppages or are holding vehicles at the border, still deciding how to approach the new tariff rules.

April new-vehicle sales may well be strong as existing inventory is drawn down. But our team is expecting new-vehicle sales dynamics to shift by summer as the market slows under the weight of higher prices. Our full-year forecast has been lowered to 15.6 million from 16.3 million.

Inventory

Inventory, both new and used, will be a key metric to watch. New-vehicle inventory increased modestly to 2.67 million units toward the end of March, down 2.7% against the same time in 2024. But a surge of sales pushed days’ supply lower to 71, down from 89 a month earlier. Our full, official inventory report from vAuto will be available next week, and at that point, we will likely see the full picture of strong month-end sales.

Used-vehicle inventory will eventually be impacted by new-vehicle tariffs as well. Used inventory was trending lower late in March, falling to 2.15 million units, down 1.2% against 2024. Used days’ supply declined 4% on the week, moving down to 38 days. But that is mostly typical for this time of year, as the used-vehicle market feels its “spring bounce” during tax refund season, with stronger sales and tightening inventory. Our team will be reviewing used vehicle pricing and sales during the quarterly Manheim Used Vehicle Value Index (MUVVI) call on Monday. Sign up here to join.

Before tariffs went into effect, we could see that brands had different levels of immediate exposure due to their current supply levels. Analyzing our vAuto data, the current days of supply – or how long existing inventory will last based on the current sales pace – shows that the market had 89 days’ supply nationally at the beginning of March, so nearly three months of available new vehicles, before the month-end rush pulled days’ supply lower. Some brands had significantly more: Ford, Mazda and Hyundai, all had supply levels above four months at the start of March. Meanwhile, Stellantis brands Jeep and Ram had slightly less after recent reductions and, typically, Toyota, Honda and Subaru had much tighter inventory.

It is more important, however, to look at key, high-volume, lower-priced vehicles that will certainly be challenged by the new tariff plans. We can see great variation there as well. Here is a list of popular, affordable vehicles, all exposed to new, higher tariffs. (And note that some models have multiple country sources.)

HIGH-VOLUME AFFORDABLE VEHICLES IMPACTED BY TARIFFS

Pricing

According to our analysis, the average price of a new vehicle in the U.S. is north of $48,000. Importantly, however, more than 40% of new-vehicle sales by volume in 2024 were priced under $40,000. These “lower-priced” vehicles are particularly vulnerable to the new tariffs.

Our analysis suggests the 25% tariff on imported vehicles will apply to nearly 80% of vehicles priced under $30,000. Vehicles in this category include popular models such as the Honda Civic, Toyota Corolla, Chevy Trax and Trailblazer, Nissan Sentra and Honda HR-V.

Compact SUVs – most priced well below industry average – will also be impacted. Some of the best-selling vehicles in the market today, the Toyota RAV4 and Honda CR-V, are exposed, and also volume products such as the Nissan Rogue, Chevy Equinox, Hyundai Tucson and Subaru Forester. How much will vehicle prices go up? At this moment, it is impossible to say, as each automaker will handle the tariffs differently.

Prior to the COVID pandemic and supply chain disruptions that followed, new-vehicle prices typically rose about 3-to-4% annually, roughly aligned to natural inflation. Following the initial surge of the pandemic, new-vehicle price growth accelerated notably: In 2021, the average new-vehicle transaction price was nearly 15% higher in December than it was in January. New-vehicle price inflation cooled dramatically in 2023 and 2024. What’s on tap for 2025 is yet to be seen.

But all roads lead to this fact: In the coming months and years, as new tariffs settle into place, vehicle prices in the U.S. are expected to increase. A bill for the 25% duty at the border for imported vehicles and a 25% tariff on foreign content in vehicles assembled inside the U.S. will likely result in price inflation within the auto industry. Our expectation is that vehicles impacted by these tariffs could see prices increase 10-15%. In addition, given market dynamics, we also anticipate seeing at least a 5% increase in prices of vehicles not subjected to the full 25% tariff.

U.S. Manufacturing

Cox Automotive’s position on tariffs is that they will add cost to a business already facing affordability issues and profitability challenges. The goal of the Trump administration is admirable – grow U.S. manufacturing – but the current U.S. auto market has been shaped by global trade for more than 60 years, and abrupt changes to the status quo will be disruptive.

We know this: The auto industry is a high-cost, complex, long-horizon business that operates best in a stable, consistent environment. However, it is also a highly innovative, tech-intensive industry and one that has recently come under increased pressure by the success of Chinese manufacturers that have raced ahead in terms of speedy and efficient development cycles, as well as cost efficiency.

This situation comes at a time when traditional automakers are deeply engaged in rethinking decades of ingrained production methodologies. So, while the business of building, selling and servicing vehicles is highly dynamic, given sufficient time, investment, and the proper incentives, automakers and dealers should be able to navigate this challenge. The toughest part will be doing so without pricing more consumers out of the new-vehicle market, shrinking the market further.

As our team has noted before, tariffs can be effective tools to level international playing fields and grow domestic manufacturing. How they are implemented, however, matters. The size and structure of the global auto industry make rapid change difficult at best – factories take time to build, supply chains years to create, and workforces cannot be developed overnight. In the auto industry, sudden changes usually produce only one result: Chaos.

It is important to remember that nearly every volume automaker that sells vehicles in the U.S. also builds vehicles in the U.S. or in North America, where the long-standing rules in USMCA (formerly NAFTA) encouraged investment and production. These are familiar names: Acura, Audi, BMW, Genesis, Honda, Hyundai, INFINITI, Kia, Lexus, Mazda, Mercedes-Benz, Nissan, Subaru, Toyota, Volkswagen, Volvo and, of course, all the “domestic” nameplates produce vehicles in the U.S. However, these companies are global players as well, manufacturing and selling vehicles in nearly every corner of the global market and balancing global product needs and global supply chains. The U.S. is a big market, but not the biggest.

We support manufacturing vehicles within the United States; however, it is important to acknowledge that such transitions require time and investments, which are certainly possible, but all begin with long-term stability in policy and consistent rulemaking at the borders. The rollout of massive new tariffs at the U.S. border has been anything but.

What’s Next

As noted above, the Cox Automotive Economic and Industry Insights team expects sales to be healthy in the short term. April and May may well be good months for vehicle sales, with consumers feeling an urgency to buy, even though loan rates remain close to 25-year highs and incentives are likely to shrink. Production disruptions and declines could be a reality this summer, especially as automakers and suppliers work to align practices with the new rules. And with additional tariffs likely pushing prices higher across the broader economy, per a Rose Garden ceremony on April 2, the auto market is absolutely heading into uncharted territory, a rough road indeed. We will do our best to provide perspective on this story as it continues to unfold.