Tariff Update: Imported Automobiles

Update: On March 26, the President announced a 25% tariff on all imported vehicles that went into effect on April 3.  Currently, all vehicles imported from Canada and Mexico that comply with USMCA production rules are exempt from this tariff.  

The administration’s rapidly evolving trade policy continues to fuel uncertainty and concern across the automotive industry. On March 4, the previously announced tariffs on Canadian, Chinese, and Mexican imports officially went into effect. The President also recently introduced a 25% tariff on imported automobiles which went into effect on April 3 and will have significant implications for fleet operators.  

Imported Automotive Tariff

In February, the President announced preliminary plans to impose a new 25% tariff on automotive imports which would take effect on April 3. As a result of this tariff, automakers will face higher costs which are likely to be passed on to the consumer. 

In 2024, imported vehicles accounted for approximately 30% of all U.S. vehicle sales, totaling $235 billion. This includes vehicles imported from Mexico (33%), Japan (17%), South Korea (16%), Canada (13%), and Germany (11%). The exact impact of the proposed automotive tariff will depend on how automakers adjust their supply chains to potentially increase domestic production. 

Potential Cost Implications

The vast majority of automakers rely on various international supply chains for cost efficiency, and tariffs on imported vehicles (as well as automotive parts) could disrupt these well-established supply lines. A recent analysis of the impact of these combined tariffs forecasts a price increase ranging from $5,000 to $15,000 depending on the model. 

Secondary Market Outlook

While tariffs will have a direct impact on the cost of new vehicles, used vehicle prices are also expected to climb as a result. With many buyers likely to face affordability challenges in the new vehicle market, some will pivot to used vehicles instead. As a result, used vehicle prices on the secondary market are expected to increase by 3%.  

How exactly these sweeping tariffs will affect the entire automotive industry, including fleet operations, remains extremely fluid. Holman is monitoring the situation closely and will provide regular updates as the policy continues to evolve.