Auto industry enters high-stakes reset under new tariffs — report

The auto industry is experiencing a period of extreme uncertainty as new U.S. tariffs on imported vehicles take effect.

Why it matters: Given how deeply intertwined the global supply chain is—automakers are still assessing the impact—and it’s too early to pinpoint exactly how much car prices will rise. But early forecasts suggest consumers could be looking at thousands of dollars in extra costs for new vehicles.

What’s happening: President Trump’s latest trade policy imposes a 25% tariff on all imported vehicles as of April 3, with a second round of levies targeting imported auto parts scheduled to begin no later than May 3.

• The goal—according to administration officials—is to revive domestic production. But the nature of North American auto manufacturing makes that easier said than done.

Zooming out: Manufacturers assemble vehicles today using a complex, cross-border supply chain. Many parts jump back and forth across the U.S., Canadian, and Mexican borders several times before a car rolls off the line.

• On top of that—each time a new part is added, the value of the car increases—meaning that every compounding tariff accrued becomes a more expensive burden to bear.

• And according to Sam Abuelsamid, Vice President of Market Research for Telemetry—automakers cannot absorb these costs without cutting into their margins, workforces, or investments.

With all this in mind, Telemetry forecasts that vehicle prices could rise 10–20%, or about $5,000 to $10,000 per unit if the tariffs remain in place. Additionally, Telemetry's report predicts that light vehicle sales in the U.S. and Canada could fall by 1.8 million units this year and remain depressed through 2035.

Worth noting: Every estimate is just that—an estimate. Costs will vary depending on how long tariffs last, how OEMs rework supply chains, and whether consumers push back or accept any price hikes.

The big picture: President Trump's administration has framed the tariffs as a return to 19th-century-style trade policy—replacing income tax revenue with duties. But for such a globalized industry, the consequences could be far-reaching.

• Automakers like Stellantis $STLA ( ▼ 1.34% ) have already paused operations at five plants across Mexico and Canada.

• General Motors $GM ( ▼ 0.57% ) is ramping up truck production in Indiana.

• Ford $F ( ▼ 0.48% ) and Stellantis are increasing incentives to counteract price hikes.

Between the lines: Sales forecasts range wildly depending on trade outcomes:

• In a best-case scenario (no trade war and strong economic growth), North American auto sales could reach 24.6 million units by 2035, per Telemetry.

• In a worst-case tariff environment, sales may stall at 17.9 million units—a 7-million unit shortfall over the next decade.

• Meanwhile—EV sales are still expected to grow—driven in part by extended range electrified models (EREVs) which are on track to overtake plug-in hybrids (PHEVs) by 2032.

What’s next: Automakers are weighing their options, but there’s no easy fix. Reshoring production to avoid tariffs would take years and cost billions—and even then, it likely wouldn’t restore the scale efficiencies lost.

Bottom line: Prices haven’t moved much—yet. Many automakers are holding the line through at least June. But as added costs make their way through the system, the real test will come at the dealership level, where each transaction is negotiated case by case. With affordability already stretched, how much more consumers can absorb is still the big question.

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