Auto Tariffs Explained: What They Mean for Your Next Car Purchase

The tariffs on automobiles officially went into effect at 12:01 a.m. EDT on April 3, 2025, with tariffs on automobile parts following on May 3rd. While that might sound like a footnote in a trade report, it is having a real consequence on your wallet — especially if you’re planning to buy a new vehicle soon. In this post, you’ll find auto tariffs explained — what they are, why they’re being implemented, and how they might affect the price, availability, and long-term cost of your next car.

Whether you’re buying new, used, or just trying to understand what’s behind the headlines, we’ve got you covered.

What are auto tariffs?

Before diving into how tariffs affect car prices, let’s get clear on what a tariff really is.

A tariff is a tax on imported goods—in this case, a 25% tax on vehicles brought into the U.S. But it’s important to understand that tariffs don’t target foreign car brands directly; they target where the vehicle is built.

Take the BMW X5, for example. BMW is a German automaker, but the X5 is primarily assembled in Spartanburg, South Carolina, which means it isn’t subject to the import tariff. Meanwhile, GM builds some trims of the Chevrolet Silverado in Mexico, so those versions face a 25% tariff when they enter the U.S.

So, while tariffs are intended to encourage manufacturing within U.S. borders, they don’t neatly align with brand nationality. And while all imported vehicles will face higher entry costs, not every buyer will feel the impact equally—we’ll explain more in the next section.

Understanding the auto tariffs direct impact:

On Complete Vehicles: 25% tariffs on imported cars affect nearly half the US car market, meaning if you’re looking at popular brands like Toyota, Honda, Volkswagen, or luxury imports, you’re likely looking at vehicles that now carry this additional cost.

On Auto Parts: An additional 25% on imported parts, which every car built here depends on, means even 100% “Made in the U.S.” vehicles will see cost increases since modern automotive manufacturing relies heavily on global supply chains.

USMCA Exemptions: Any car assembled in the United States with 85% “USMCA compliant” parts would essentially be tariff-free. The problem is that virtually no vehicle meets that 85% threshold, as reported by CNN and leading industry analysts.

Why Is the U.S. Imposing These Tariffs?

At their core, these tariffs are designed to protect and promote domestic manufacturing. By making imported vehicles and parts more expensive, the U.S. government aims to encourage automakers to build more cars within U.S. borders. This is with the hope of creating jobs and reducing reliance on global supply chains.

If it costs more to import, companies may shift production to avoid the added expense. At the same time, higher prices on foreign-made vehicles could nudge consumers toward buying models that are assembled in the U.S.

Policymakers also argue that tariffs strengthen national security by reducing dependence on other countries for critical goods. Especially in an industry as vital as transportation.

It’s reshaping the automotive landscape in a totally new direction, but that does come with a cost—particularly for consumers.

Tariffs often translate into higher prices at the dealership, meaning you may pay more for new cars and replacement parts. This increase affects not only new vehicle buyers but also those seeking repairs or upgrades, as imported parts become pricier.

Moreover, some automakers might pass these added costs onto consumers rather than absorb them, shrinking your purchasing power and potentially limiting your options. For those who rely on affordable imports or specific foreign models, the choice might become narrower or more expensive.

Looking Ahead: What to Expect

Next 6-12 Months: Higher tariffs increase the cost of importing certain models, leading to fewer choices for consumers and longer wait times for custom orders. Expect continued price volatility as manufacturers adjust their strategies.

1-3 Years: The industry will likely see shifts in manufacturing locations. Some automakers may potentially move more production to North America to avoid tariffs. This could eventually help stabilize prices but will take time to implement.

Long-term Considerations: While the stated goal of these tariffs is to boost domestic manufacturing, the transition period will likely mean higher costs for consumers regardless of where their vehicles are made.

Final Thoughts

Whether you’re shopping for your next vehicle or watching prices climb, understanding auto tariffs goes beyond economics. It empowers you to make smarter decisions. These new policies are already influencing what’s available on dealership lots. This includes how much you’ll pay and what options you might have to give up.

So before signing on the dotted line, take a closer look at where your car is built. In today’s market, those small details can drive big differences in cost.