Affordable compact cars could be first to see rising prices from tariffs

Old_Joe

Following are edited excerpts from a current report in The Washington Post:

The Trump administration’s 25 percent tariffs are likely to lift costs for virtually every car, analysts say, but popular brands like Toyota, Honda and Subaru are among the most vulnerable.

Car costs, which have already spiked 20 percent since the pandemic, are expected to get another jolt in coming weeks, with the Trump administration’s newest proposed tariffs likely to add thousands of dollars to manufacturers’ sticker prices. It’s unclear exactly how and when prices will start ticking up, but analysts say brands such as Lexus, Toyota, Honda and Subaru are likely to be among the first to face higher costs because they have the smallest stockpiles of cars already in the U.S.

“We’re going to start seeing prices rise almost immediately,” said Charlie Chesbrough, senior economist at Cox Automotive, who expects an average markup of $6,000 per car. “Some of the most affordable vehicles — compact SUVs, for example — are made outside the country, so they’re going to be the most vulnerable.”

In addition to lifting car prices, economists say the new tariffs will stifle global production and cut into U.S. economic growth at a time when there are already signs of strain. Consumers, who account for roughly 70 percent of the country’s economy, are beginning to pull back in the face of high costs and elevated interest rates. Further price increases could put a freeze on the sale of motor vehicles and parts, which accounted for about 20 percent of the economy’s growth in late 2024.

“You take a $40,000 car — now it’s a $45,000 or $50,000 car,” said John Luciano, owner of Street Volkswagen, a dealership in Amarillo, Texas, where roughly 80 percent of cars come from overseas. “There is no way around it, these tariffs are going to be brutal.”

“Even if you’re thinking, ‘I’ll just go buy the most American car I can think of — a Ford F-150,’ it’s really not that simple,” said Joseph Yoon, consumer insights analyst at the automotive research site Edmunds. “Half the parts on that truck are from Canada or Mexico.” "For a lot of people, it’s the second-biggest expense after housing, and it’s how they get to work”. “Car prices are already the highest they’ve ever been, and now you slap a 25 percent tariff on them — that means customers will stop buying. It’ll be a hit to the economy.”

At Glassman Automotive Group in Southfield, Michigan, the automotive group’s president said that an additional spike in prices would push car buying further out of reach for many. “It’s going to affect all the brands I sell — Hyundai, Kia, Subaru,” said George Glassman, who employs about 120 people. “No one really knows just yet whether this means you’ll be $2,000 or $3,000 or $7,000 more for a car, but it’s going to create an incredible disruption to the overall industry.”

“One of the main goals of the tariffs is to reshore production, to bring manufacturing back from overseas,” said Abby Samp, an industry economist at Oxford Economics. “There’s probably some scope for that, but it is going to involve a significant amount of investment, and it will raise costs for U.S. manufacturers and households.”

Sven

That would pose undue hardship for many budget minded families, including us.

As those who like pickup trucks and SUV, they will see a lot more then $4K increase; something more like $10-15K!

Here is a Barrons article on price hike.
https://msn.com/en-us/money/topstocks/trump-tells-car-companies-not-to-raise-prices-why-that-s-bad-news-for-gm-and-ford/ar-AA1BQFCo?ocid=hpmsn&cvid=17ad90f53b8e4891e4bdd6a7c9aaf876&ei=2

hank

Few mid-sized or larger sedans are manufactured by the U.S. makers. Interestingly, Toyota builds the mid-sized Camry sedan in Kentucky - though parts probably come from around the world. But the U.S. makers (Ford,GM) have largely shifted production to pickups and SUVs. From what I’ve read Honda builds sedans in Canada.

Bottom line: I don’t like being pushed / prodded by financial incentives into driving a heavy higher riding truck / SUV over a well built sedan. How does that help the environment, ease overcrowding of highways / infrastructure, keep insurance rates down or conserve energy? To me it seems wasteful to drive a big heavy SUV or truck to the market to grab a loaf of bread, 6-pack of beer or a couple bags of groceries.

msf

I started wondering what would happen if all the "real car" (not SUV, not truck) manufacturers simply picked up their marbles and went home. Reuters reports:

Automakers may spread the tariff cost between U.S.-produced and imported models, cut back on features, and in some cases, stop selling affordable models aimed at first-time car buyers, as many of those are imported and less attractive if they carry a higher price tag.
...
Affordable models most likely to be affected include the Honda CR-V, Chevy Trax, Subaru Forester, Chevy Equinox and Honda HR-V, said Erin Keating, executive analyst at Cox.

"Car makers know they have certain vehicles in their portfolio that can tolerate lower profit margins," Keating said. "Some vehicles may just prove to be too expensive, and most of those are affordable models manufactured outside the U.S."

https://www.reuters.com/business/autos-transportation/us-car-buyers-face-higher-prices-less-choice-under-trumps-tariffs-2025-03-28/

Instead of halting sales, manufacturers might simply stop building inside the U.S., especially if those cars are going to be heavily tariffed anyway (foreign parts).

Car Manufacturing Plant Shutdowns Could Cost Half a Million US Jobs

In response to potential new tariffs from the Trump administration, Japanese car manufacturers Honda and Toyota, which sold more than 3 million cars in the US last year, are considering shutting down production at some or all of their US plants.
...
Together, Honda and Toyota have 18 US auto plants and employ more than 55,000 workers across 13 states.
...
If Honda and Toyota were to shut down production, even briefly, those plants would send unemployment rates skyrocketing—in some areas by more than 30 percentage points. The newly unemployed workers could stretch state and federal safety net programs through claims on unemployment insurance benefits, Social Security Disability Insurance benefits, or other kinds of support.
...
Shutdowns would also cause indirect effects: individual and corporate income tax revenue would decline; companies that produce tires, glass for windshields, and steel for car frames would all be affected; and unemployed auto plant workers would have less money to spend in restaurants, movie theaters, and retail stores. Using estimates from the Economic Policy Institute of employment multipliers—the number of other jobs that would be affected by an auto plant closure—we can see that plant shutdowns could cause an additional 410,000 jobs to be lost.

https://www.urban.org/urban-wire/car-manufacturing-plant-shutdowns-could-cost-half-million-us-jobs
(good tables and graphics in the piece)

Derf

Can anyone point out if trucks will have a tariff on parts shipped to USA? Auto's yes trucks?

hank

@Derf - I don’t think they make any distinction between “cars” and “trucks”. All the same to them.
You and I are old fashioned and still think of cars as sedans with a drunk trunk in the back.
So the tariffs will affect SUVs and pickups.

Interesting side note: A friend just purchased a big pickup - a full sized Chevy Silverado about as big as they come. Under the hood? A 4-banger.

a2z

hank, am so happy to see w/can sometimes agree here.
there are more than enough fossil patriots taking their luxury suv and superduty truck 1/2 mile for snacks. no one will force me into being one.
and no matter how good and\or cheap a car may be, i dont want to clearly support american foes, exterior(byd) nor interior (tesla).
looks like the 10 and 15 yr-old american-made toyotas are going to be around the house a bit longer.

derf, this is basically an order to exclude tesla w/out using the name.
autos and light (non-industrial trucks)
https://seekingalpha.com/news/4426291-start-the-tariff-engines-what-does-made-in-america-mean?

the non-gop american consumer can EASILY make this bias laughable simply by never considering a tesla purchase.

Mark

@hank - That Silverado w/a 4-banger, I'm severely puzzled as to what they expect to do with that other than proclaim some kind of status badge. IMHO what a massive waste. I wasn't aware that Chevy would even equip one that way and ISTM that little 4 cal will be straining its heart out.

hank

Mark said:

@hank - That Silverado w/a 4-banger, I'm severely puzzled as to what they expect to do with that other than proclaim some kind of status badge. IMHO what a massive waste. I wasn't aware that Chevy would even equip one that way and ISTM that little 4 cal will be straining its heart out.

@Mark - I (perhaps deceptively) omitted that the guy’s 4-banger is turbo charged. I’d expect for most purposes (short of towing a big trailer) it would perform well. Everything I’ve read about turbos is that they’re expensive to maintain and don’t last as long. I won’t say “never.” But given other reasonably priced options, a turbo wouldn’t be my first choice.

OTHO - I’d imagine it would be a lot fun driving a small to mid-sized turbo-charged auto. I looked at Toyota’s slightly larger Crown before buying my Camry. Both hybrids. But the top of the line “sports version” of the Crown also boasts a turbo (in addition to its hybrid powertrain). Lists for $50K+ It’s said to be a hoot to drive!

Link to story / Silverado & F150 4 cylinder trucks

FD1000

It's another story among many that tries to scare voters.
Everything will be up a lot.
SS will be cut.
Gov will eliminate your pay, SS, and other benefits.

But the numbers show that food, housing, and vehicles went up through the roof during the previous administration. That's a fact.
The future is unknown so far.

So, again, tariffs are just an on/off tool.

@Old_Joe, please keep the scary stories coming. This is a political thread that should be posted in the OFF threads.

Old_Joe

FD1000 said: "This is a political thread that should be posted in the OFF threads."

“Another wipeout walloped Wall Street Friday,” Stan Choe of the Associated Press wrote today. The S&P 500 had one of its worst days in two years, dropping 2%. The Dow Jones Industrial Average fell 715 points, losing 1.7% of its value. The Nasdaq Composite fell 2.7%. On Tuesday, news dropped that the administration’s blanket firings and wildly shifting tariff policies have dropped consumer confidence to a low it has not hit since January 2021. Today’s stock market tumble started after the Commerce Department released data showing that consumer prices are rising faster than economists expected.

AIG chief international economist James Knightley said: “We are moving in the wrong direction and the concern is that tariffs threaten higher prices, which means the inflation prints are going to remain hot.” Business leaders like lower interest rates, which reduce borrowing costs and make it cheaper to finance business initiatives, but with rising inflation, the Federal Reserve will be less likely to cut interest rates.

@FD1000- Right you are! All of this is political and will have absolutely no impact on the financial arena.

(Note: Above information quoted from Heather Cox Richardson, 3/28/25.)

hank

I suspect valuations had a bigger part to play in Friday’s market than anything else. I don’t know where the bottom or “reasonably valued” point might be for the S&P / NASDAQ / DJI. But suspect we ain’t there yet. Interestingly, utilities & infrastructure had a great day. Nat resources / many commodities remained stable from what I could tell.

I know it sounds dumb - but if we all could avoid the “T” word and just talk about the administration, the government, Washington or “them” for a little while it might sooth the nerves of people like FD and help with general harmony over here on the investing side. And everybody would know who you’re really talking about.

WABAC

I think it's great that people think that launching the largest trade war since the Smoot-Hawley tariff will have no significant impact on world equity and bond markets, much less the bank accounts of John and Jane Doe.

It's just not polite to talk about it.

hank

WABAC said:

I think it's great that people think that launching the largest trade war since the Smoot-Hawley tariff will have no significant impact on world equity and bond markets, much less the bank accounts of John and Jane Doe.

It's just not polite to talk about it.

And that’s the purpose of Mutual Fund Observer? To debate the great financial issues of the world? Go at it then.

Old_Joe

@hank- If one is reporting someone else's original content it's difficult to not use the same wording as the original, don't you think? In looking at my posts in this thread I don't see where I've mentioned "the T word" even once.

Old_Joe

"And that’s the purpose of Mutual Fund Observer? To debate the great financial issues of the world?"

How about to consider and understand the every-day financial issues of the United States of America, and we, the citizens thereof?

a2z

if the administration, the government majority, and the scotus majority are all taking orders from one person, then using the name seems both apt and efficient .

although longer, ya probably gonna like the nicknames even less.

JD_co

SILENCE! All of you. How dare you speak (indirectly) of the grand leader this way.

Keep this up and masked men will come to take you away in the night. We must censor any negative references towards the grand leader. Muzzle the dissenters. Schnell!

If you know what's good for you, stay silent....just like sweet little lambs.

WABAC

hank said:

WABAC said:

I think it's great that people think that launching the largest trade war since the Smoot-Hawley tariff will have no significant impact on world equity and bond markets, much less the bank accounts of John and Jane Doe.

It's just not polite to talk about it.

And that’s the purpose of Mutual Fund Observer? To debate the great financial issues of the world? Go at it then.

We can't discuss the impact of "great financial issues" on our investments? Why do people buy and sell what they buy and sell? I don't know. Can't talk about it.

I think I've seen one post here defending tariffs. If they're a good idea, then maybe they would have a beneficial effect on our retirement plans. Or maybe someone would have an idea of how to invest to take advantage of threatened tariffs.

But no. The people that object to the discussion, such as yourself, suggest they shouldn't be talked about at all in the context of investing. It's only politics. And nihilism is in bloom this spring. Let's talk about the price of scotch instead.

larryB

@WABC…… Thank you so much for your post and the illustration. A picture is often worth a thousand words…., Or more.

BaluBalu

WTF.

There was no political commentary in any of the posts before FD labeled the thread as “political” and turned you guys into pretzels. You guys know he is F…ing with you guys, like every time he posts about the stock market? Right? He does not invest in stocks. He does not even invest in bond funds. He trades bond funds that are more like floating NAV Money Market funds. Since Trump ratcheted up the Tariff talk, FD already went to 100% cash. Good for him. Obviously, investing part of this Forum has no use for him. Just as everyone in this Forum, Trump too is a tool for FD’s entertainment. FD is hyper focused about it and focus is paramount for everyone.

To my knowledge, Trump has not done anything he said he would not do. He says every day that everything is on the table, he is absolute, there will be disturbance, there will be consequences for certain people and countries, he will wage a cultural war, on and on. He said the same things before he got elected. The man is getting tired of repeating. He has been saying many of the same things since the 1980s. People need to focus on what (everything) he says, rather than hope for something different.

For this thread specifically, Trump is a protectionist at heart - has always been.

He is focused on optimizing his time and energy and may be we too start doing the same.

You can continue discussing Trump policies and evaluate the merits of them. You like them or not, you will get to vote on them in 18 months. Good luck.

P.S.: I will post again if I think I can be useful.

Derf

Think I'll be voting in 3 days Tuesday.

gman57

d

Sven

Remember we have a mob boss running the show. And he answers to President Sicko.

There you go no “T”word.

As BS1k, best to ignore this troll who has contributed nothing useful to this board.