The proposed 25% tariffs on automobiles and parts from Mexico and Canada by the Trump administration could significantly impact car prices, adding nearly $6,000 to the cost of a new vehicle, according to Benchmark Co.
Consumers looking to purchase new cars may face higher costs if the proposed tariffs come into effect. Benchmark Co. estimates the average sticker price of a new car would rise by approximately $5,790 due to the paused 25% tariffs on vehicles and components from Mexico and Canada. Consequently, the price of a new car could exceed $54,500, reflecting a nearly 12% increase compared to 2024.
The auto industry, which relies heavily on cross-border trade, stands as one of the sectors most vulnerable to these tariffs, as highlighted by analyst Cody Acree. According to Acree, the intricate trade and manufacturing networks established over the years contribute to the industry’s susceptibility. Over 22% of fully assembled cars sold in the U.S. originate from Mexico and Canada, while around 40% of automotive parts are imported from these countries, amounting to over $200 billion in exports in the previous year.
Specifically, Mexico exported $95 billion worth of finished automobiles and $68 billion in parts to the U.S. in 2024. Canada followed with exports exceeding $36 billion in completed vehicles and nearly $16 billion in parts. These figures underline the substantial trade volumes at risk.
The proposed tariffs, coupled with existing tariffs on steel and aluminum, would pose further challenges, as noted by Ford Motor CEO Jim Farley. Speaking at a recent investment conference, Farley acknowledged the ambition behind strengthening the U.S. automotive sector but mentioned the current situation results in ‘a lot of cost, and a lot of chaos.’ His remarks underscore the ongoing uncertainty and potential disruption within the industry.
While the tariffs have been temporarily suspended following tentative agreements with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum, stakeholders remain uncertain about the future. The implications of these tariffs, if reinstated, could extend beyond pricing to affect the supply chain and consumer purchasing power. Ultimately, whether these tariffs are implemented will determine the extent of their impact on the American automotive market.
The proposed tariffs on cars and parts from Mexico and Canada, if enacted, could substantially boost the cost of new vehicles in the United States. As the automotive industry anticipates the potential changes, the impacts on pricing, supply chain, and consumer buying power remain key concerns for both manufacturers and consumers alike.
