Trump's Tariffs Are Killing Affordable Cars in US: Study

Newsweek

5 days ago

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President Donald Trump's new tariffs on vehicles and auto parts have contributed to a slowdown in affordable car availability in the United States, according to a study by Cars.com.
The findings suggested that the 25 percent auto tariffs imposed in April, alongside the 50 percent metals tariffs targeting the European Union (EU), Mexico, and Canada, have affected new and used car prices, impacting average Americans seeking budget vehicles.
Why It Matters
The rise in car prices and tightening supply of affordable models present challenges for millions of Americans facing high transportation and insurance costs.
Industry analysts, dealership owners, and consumer advocates have warned that tariffs would make new and used vehicles less accessible, further straining surging auto repair bills and insurance premiums.
The Trump administration imposed a sweeping 25 percent tariff on imported vehicles and car parts in April. The president also hiked the 25 percent levy on steel and aluminum up to 50 percent last month. However, an earlier executive order prevents tariff "stacking" on auto parts for two years, with firms assembling the vehicles in the U.S. allowed small reimbursements.
What To Know
Cars.com reported that cars priced under $30,000—long a staple for cost-conscious buyers—had inventory growth of just 3.9 percent year-over-year during the first half of 2025. The vast majority, 92 percent, of sub-$30,000 models in the U.S. are imports meaning they are especially susceptible to Trump's tariffs.
The new study also found imported models dominated the more affordable new car market, with only the Honda Civic and Toyota Corolla being produced domestically for under $30,000—and some trims of those were still imported.
Price increases for new cars have been relatively modest, at $97 on average, since the tariffs were announced. However, sharp rises were seen for certain models, especially those from the United Kingdom, which were over $10,000 more expensive, and the EU at about $2,500 more. Many experts believe that most of the auto sales this year have been of inventory that was imported before the duties, meaning their prices would be unaffected.
Consultants at AlixPartners has projected that tariffs would ultimately add nearly $2,000 per vehicle and reduce total U.S. car sales by approximately 1 million over three years.
Trump's tariffs on metals such as steel and aluminum continued to raise production costs for automakers, compounding pressure on entry-level vehicle affordability.
While the average American spends approximately $45,000-$48,000 on a new car, according to J.D. Power and Anderson Economic Group, cars at the lower range are essential for millions of Americans who cannot afford higher purchase prices, or the many budget-focused consumers who prefer a more affordable deal.
Hondas are seen at a dealership in Bedford, Ohio, on July 8.
Hondas are seen at a dealership in Bedford, Ohio, on July 8.
Sue Ogrocki/AP
Who People Are Saying
Cars.com said in its July report: "The pace of sales and inventory movement will depend on the scope of tariffs, with automakers likely to adjust production to align with a smaller, more price-sensitive buyer pool."
Mark Wakefield, global auto market lead for AlixPartners, told reporters in an online briefing last month, "These tariffs bring a big wall of cost..."Consumers [will be] taking the majority of the hit."
President Trump said in April as he unveiled his 25 percent auto tariffs: "You're going to see prices go down."
Chris Harto, a senior policy analyst at Consumer Reports, told Inside EVs: "It does not appear like any of the policies will result in people paying less to buy and own vehicles in 2028 or 2029 than they do today."
Jessica Caldwell, head of insights at auto-buying resource Edmunds, told Associated Press even repairs could become more expensive due to tariffs: "If you are bringing your car to get repaired, chances are, it's going to have a part that comes from another country. That price that you pay is likely going to be directly affected by the increase [from these tariffs]."
What Happens Next?
Analysts agreed that most of the early 2025 car sales involved vehicles imported before tariffs took effect, delaying the full impact on prices. However, as pre-tariff inventory dwindles in the second half of the year, both new and used car prices are expected to rise.