Tracking impact of auto tariff relief is no easy feat

Now that all the auto tariffs are locked in (for now), we have a lot to unpack. (4 min. read)

Author

Marcus Amick
May 05, 2025

Recent reports are providing more clarity on sweeping auto tariffs and recently announced exemptions meant to (somewhat) soften them. But it’s still unclear as to who the real winner is in this battle. 

The details: A report by S&P Global clears up some key aspects of the tariff relief, especially regarding the calculated vehicle value and content eligibility, and how it plays out with the United States-Mexico-Canada Agreement (USMCA).

  • Based on S&P’s evaluation of signed executive documents, the tariff relief is only available for vehicles assembled in the U.S. from April 3, 2025, through April 30, 2027, in two stages. 

  • An automaker can request an “import adjustment” to offset import duties on parts used in U.S. vehicle final assembly—because as of May 1, parts compliant with the terms of the USMCA have a zero tariff.

  • An automaker can request the offset by detailing what part is being used for what vehicle and can include assigning direct importers—with the ability to use the offset for parts it imports from a supplier as well.

Between the lines: Of course, if you’re a retailer or potential car buyer, you’re likely thinking: “So exactly how does all this talk of ‘offsets’ for parts trickle down to the thing that impacts ‘me’ most—namely vehicle pricing?” Well, pinning that down is still tough, given all the variables. However, the S&P Global report does clear up some questions on how it all plays into the Manufacturer’s Suggested Retail Price (MSRP) value.

  • An automaker can apply for an import adjustment offset amount equal to 3.75% of the aggregate MSRP value of all automobiles assembled in the US from April 3, 2025, to April 30, 2026.

  • That import adjustment offset amount drops to 2.5% of the aggregate MSRP value for all automobiles assembled in the U.S. from May 1, 2026, through April 30, 2027. 

What they’re saying: “The changes the White House has announced on the tariffs has largely reduced the expected tariff bill, but the uncertainty and change still complicates decision making at suppliers and automakers. Shifting production to the U.S. does mean shifting to a more expensive manufacturing cost base and a significant capital expenditure to make it happen,” said Stephanie Brinley, Principal Automotive Analyst for S&P Global.

Digging deeper: Michigan-based consulting firm, Anderson Economic Group, said automakers will still face a $2,000 to $12,000 tariff impact per vehicle—even with the White House moving to soften the blow on imported auto parts. 

  • For example, U.S.-assembled vehicles like the Honda Civic and Odyssey, the Chevy Malibu, Toyota Camry Hybrid, and Ford Explorer face an impact of $2,000 to $3,000.

  • Import cars will still suffer the biggest blow (no surprise there)—with the impact pegged at anywhere from $10,000 to $12,000 for vehicles such as the Mercedes G-Wagon and Ford Mach-E, which is built in Mexico.

  • On the other hand, the Ford Explorer assembled in Chicago, which previously faced a tariff impact of about $4,300, will see its impact drop to about $2,400, whereas some Jeep, Ram, and Chrysler models could be impacted by up to $8,000.

The other side of the coin: “I really don’t see this as a great opening for manufacturers to play games with the MSRP, because one, they've been very careful and they know that the White House and consumers alike are paying attention to what is happening.” said Cox Automotive Chief Economist Jonathan Smoke during a recent presentation. “MSRPs at the end of the day are key to measuring the residual, and are key to the dynamics of understanding loan to value on the vehicle in financing, which is 80% of the transactions that occur.”

Bottom line: Tariff relief is welcome, but it doesn’t eliminate the retail impact. Dealers might potentially have to sell against higher costs, and with automakers taking different approaches, the result is likely to confuse both retailers and consumers, says Brinley. However, so far, automakers are largely keeping MSRPs steady, but there’s no telling how long it will last.

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