As Auto Tariffs Loom, Dealers Should Brace for Lower SalesAs Auto Tariffs Loom, Dealers Should Brace for Lower Sales

ROCHESTER HILLS, MI – Auto analysts at an annual gathering here are hard-pressed to find an upside of vehicle tariffs proposed by President Donald Trump.

At the Society of Automotive Analysts annual outlook conference, presenters warned of slower sales and higher prices that could elbow some consumers out of the market if the administration goes through with slapping 25% tariffs on Canadian and Mexican automotive imports.

Analysts at the SAA event generally panned the plan. But in WardsAuto interviews, they voiced mixed opinions on whether tariffs of that magnitude would help or hurt auto dealers.

On the eve of the tariffs taking effect last week, Trump pushed the pause button and announced a month’s delay.

Dealers in the short-term will probably benefit from the proposed tariffs, Colin Langan, a Wells Fargo analyst, tells WardsAuto.

“Dealers will have tight supplies, so prices would go up. There’d be an offset with the lower volume, but the dealers will be better off than the automakers and suppliers. Short term.”

Long-term? “It would be disruptive,” he says, citing potential higher prices and lower consumer demand bridling at rising car prices.

Asked about a general potential upside to such tariffs, he cited increased government revenue and more auto production in the U.S.

The proposed tariffs on the U.S.’s North American neighbors would negatively affect dealers, says Sam Abuelsamid, vice president-market research for Telemetry, a technology consultancy.

“You are looking at significant price increases when affordability is already a challenge,” he tells WardsAuto. “Automakers don’t have the profit margins to absorb a 25% tariff. On average, you are looking at anywhere from $5,000 to $10,000 price increases on affected vehicles. It won’t help dealers sell cars.”

Abuelsamid’s worst-case scenario: If the tariffs took effect soon and ran for the rest of the year, it could reduce U.S. vehicle sales by 1.5 million to 2 million units. U.S. vehicle deliveries last year totaled about 16 million.  

Here’s how Michael Robinet, executive director-consulting for S&P Global Mobility, sees it:

“As independent businesspeople, dealers will think their current inventory is a lot more valuable to them than inventory coming in with potential tariffs.”

Depending on the vehicles, he tells WardsAuto that automakers and dealers will show more care in “how they sell them, what they sell for and whether there will be incentives.”

Abuelsamid adds: “Also, how long will this last? Is it permanent or transitory? Those factors go into the mindset of how inventory is replenished.”

Impact on Car Shoppers

Tariffs are levies on imported goods, usually based on a percentage of their value. Importers pay them but typically pass the cost on to consumers.      

Ipsos polling indicates some shoppers (about 13%) are buying vehicles now in anticipation of later tariff-related higher prices, Patrick Sheposh, a vice president at the market research firm, tells the SAA gathering.

“There’s a lot going on, and consumers understand that,” he says. “The cost of a new vehicle has ballooned. Customers are slowing down their purchase cycle. Twenty-eight percent don’t know when they will buy their next vehicle.”

The average U.S. new-car transaction price was $49,740 at the end of 2024, according to Kelley Blue Book. It notes that vehicle prices typically peak in December, a month in which high-priced luxury models sell particularly well.

The Ipsos consumer survey cites vehicle price as consistently the No.1 purchase reason. That’s followed by experience with a previous vehicle, vehicle quality and reliability.

Will It All Work Out?

In his SAA presentation, Robinet expresses some optimism regarding the looming possibility of substantial U.S. tariffs against nations – which would likely respond in kind.

“I’m optimistic things will work out,” he says. “Over the last eight weeks, everyone has had enough. Any number of possibilities will work their way through.”

Robinet adds: “Our industry needs stability in trade relationships. Strong trade structures will be required. Tariffs skew the market.”

Discussing what he calls “Trump 2.0,” conference presenter Bill Rinna, GlobalData’s director-America Vehicle Forecasts, says that in addition to price increases, hefty tariffs would reduce consumer vehicle selection and put top-line vehicle model sales volumes at risk.

However, he speculates the administration’s tariff threats appear to be more of a negotiating tactic rather than a threat that will be carried through.

Well Fargo’s Langan says, “The auto industry is caught in the crosshairs of many Trump policies.”

Forty-four percent of U.S. vehicle sales are imports, and about 23% of them are from Canada and Mexico, Langan says.           

Top-selling vehicles built in Canada for export to the U.S. include the Toyota RAV4, Honda Civic, Honda HR-V, Ford Edge, Lexus RS and two versions of the Chevrolet Silverado, according to CarGurus.

In Mexico, top U.S.-bound imports include the Toyota Tacoma, Chevrolet Equinox, Honda HR-V, Chevrolet Silverado 1500, GMC Sierra 1500, Ford Bronco Sport, Nissan Sentra

and Ford Maverick.

“The one-month delay on tariffs comes as welcome news for now, but questions remain around the future of pricing for these vehicles,” says Kevin Roberts, CarGurus’ director-economic and market intelligence.