Tariffs on Foreign Imports Expected To Drive Costs Across the U.S.

By Richard Joseph - 29-January-2025

As we're talking about tariffs, let's focus on one industry, so we can keep the conversation simple, let's look at the effect of new tariffs on the U.S. Auto Industry.

As U.S. tariffs on foreign imports, including automobiles and auto parts, reshape the global trade landscape, the ripple effects are poised to hit American car buyers and owners hard. From sticker prices on new vehicles to the cost of repairs for aging cars, the financial impact could be profound. With Americans already navigating tight budgets, these changes may fundamentally alter car ownership and maintenance trends.

The New Car Market: Tariffs Drive Up Prices

Tariffs on cars and auto parts from countries like Japan, South Korea, and Germany will almost certainly lead to higher prices for foreign vehicles. Automakers facing increased import costs will pass these along to consumers. Even domestically manufactured cars are not immune: many rely on imported parts, such as engines or electronics, which will now come with higher price tags.

Consumers will pay more across the board, as domestic manufacturers take advantage of the reduced price gap with imports to raise their own prices.

**According to the American Automotive Policy Council, roughly 47% of parts used in U.S.-assembled cars are imported. These supply chains are highly globalized and sensitive to tariff changes.

The Used Car Market: A Surge in Demand and Prices

As new car prices rise, many Americans may turn to the used car market. This increased demand is expected to drive up prices for used vehicles, especially those from popular foreign brands. Older vehicles with strong reliability reputations, such as Honda and Toyota models, may see some of the steepest price hikes.

We’re already seeing upward pressure in the used car market due to economic uncertainty, and tariffs could further accelerate this trend.

**A recent study suggests that used car prices could rise by 10-15% if tariffs increase new car costs by a similar margin.

Holding Onto Vehicles Longer: The Repair Industry Braces for Impact

With the rising cost of both new and used vehicles, more Americans are likely to hold onto their cars longer. This trend will increase demand for repair services and parts, straining an already burdened auto repair industry.

Shop Labor Costs on the Rise

Repair shops are likely to respond to increased demand by raising labor rates. The automotive industry already faces a shortage of skilled technicians, which could exacerbate these cost increases. Modern vehicles also require specialized skills, further driving up repair bills.

Imported Parts: Another Price Hike

Many repair parts are sourced from overseas, making them subject to the same tariffs as vehicles. Even parts currently stockpiled in U.S. warehouses may become more expensive due to warehousing costs and tariff-related price adjustments when inventories are replenished.

** The Automotive Aftermarket Suppliers Association estimates that over 60% of aftermarket parts are imported, making them particularly vulnerable to tariff impacts.

Broader Economic Implications

The cascading effects of tariffs will ripple through household budgets, increasing financial strain for consumers. Higher repair and maintenance costs, coupled with rising car prices, may force many Americans to reconsider car ownership altogether.

Shift to Used and Aftermarket Parts: Consumers looking to cut costs may turn to refurbished or aftermarket components, altering the repair landscape.

Economic Inequality: The financial burden will disproportionately affect lower-income households, for whom car ownership is often a necessity rather than a choice.

A Changed Landscape for U.S. Car Ownership

Tariffs on foreign imports will ultimately have the greatest impact on the American people, especially those already struggling to afford car ownership. Rather than driving more people to buy American, these increased costs are likely to push many Americans out of the car market entirely, leaving them unable to purchase new or used vehicles. While some may argue this shift could encourage greater use of public transportation, there is no corresponding plan, funding, or national effort to enhance public transit infrastructure to accommodate this potential change.

As prices rise across the board, the effects will be felt most acutely by lower-income households, exacerbating existing economic inequalities. Policymakers and industry leaders must weigh these consequences carefully and consider comprehensive strategies that not only address the goals of tariffs but also mitigate their profound impact on American consumers.

#Tariffs #AutoIndustry #USEconomy #CarPrices #UsedCars #AutoRepair #TradePolicy #EconomicImpact #Manufacturing #PublicTransportation

Sources

American Automotive Policy Council

Automotive Aftermarket Suppliers Association

Richard Joseph is a technology and business strategist focused on supply chains, digital transformation, and the intersection of economic policy and modern enterprise.