Car Prices May Increase by $12,000 Due to New Tariffs, With EVs Facing the Largest Impact | Carscoops

      Cross-border production is expected to soon come to an end, with a new study indicating that it will lead to increased prices in the new-car market.

      A recent study predicts that car prices will rise considerably once Trump’s tariffs are implemented.

      Many vehicles could see price increases of approximately $4,000, while electric vehicles may experience hikes of up to $12,000.

      Trump has stated that the 25% tariff on imports from Mexico and Canada will take effect on March 4.

      If you’re thinking about purchasing a new car, you might want to pause and reflect on a few factors first. A recent study from the Anderson Economics Group (AEG) warns that prices are expected to soar due to Donald Trump’s 25% tariff on imports from Mexico and Canada, which is confirmed to take effect on March 4. While this would be a significant financial setback, it contributes to the existing turmoil in the automotive industry.

      The study's findings are based on the proposed 25% tariffs on Mexico and Canada and a 10% tariff on China. With these numbers, it predicts that even compact crossovers will see an increase of at least $4,000. Large SUVs with a significant amount of content from Mexico could rise in price by around $9,000, and trucks are likely to see a similar increase.

      Electric Vehicles: Facing the Greatest Impact

      Electric vehicles are expected to be affected the most, with AEG predicting an average price increase of $12,000. Coupled with the possible elimination of EV subsidies, this market could face a slow down for a while. "This scale of cost increase will directly lead—almost immediately—to a decrease in sales of vehicles most impacted by trade," stated Patrick Anderson, CEO of Anderson Economic Group, to Bloomberg. "You’ll notice that some models and trim levels will simply disappear," he added.

      So, why are electric vehicles facing a harsher impact than traditional gas-powered vehicles? It all comes down to the materials used. “All electric vehicle manufacturers will feel the effects of those [tariffs], as their reliance on steel and aluminum is considerably greater than that of conventional combustion-engine cars," said Marc Busch, a professor at Georgetown University, to CNBC. "I have no doubt this will catch [Musk's] attention, and it could certainly escalate political pressures in regard to retaliatory actions by the European Union, Canada, and others."

      Tesla's scenario is particularly interesting. They manufacture their US-sold vehicles in Fremont, California, and Austin, Texas, but many of their parts come from China, Canada, and Mexico. For instance, 15% of the Model Y's components originate from Mexico. They are already working to mitigate the impact of the impending 25% tariff on Chinese graphite, an essential material for lithium-ion batteries.

      It’s important to note that all three major US automakers produce vehicles in Mexico, Canada, or both. Ford makes the Mustang Mach-E, Bronco Sport, and Maverick in Mexico. Ram trucks are assembled in both Mexico and the USA, while GM’s Silverado is produced in all three countries involved.

      Automakers Are Already Taking Steps

      In the meantime, automakers are doing what they can to prepare for the potential tariffs. Some are having suppliers build up inventory, while others are securing parts in strategic locations to dodge the tariffs. It’s evident that the automotive industry was caught off guard by this and is uncertain about how to respond.

      A union representative informed Bloomberg that Ford is “hastily transferring products across the US-Canada border in anticipation of the tariffs.” Additionally, they are securing warehouse space to keep these parts safe from the impending tariffs.

      “Typically, we store them here (Ontario, Canada) until we’re ready to send them to the truck plants,” D’Agnolo mentioned. “But they’re finding spots in the US to store those engines to avoid tariffs.”

      Countdown: Tariffs Will Be Implemented March 4

      With the tariffs set to go into effect on March 4, time is running out to lessen the impact. Politico reported that Trump informed reporters at the White House earlier today, “There’s no more room left for Mexico or Canada” to negotiate. “They’re all set. They go into effect tomorrow.”