Tariffs Explained: Forecasting the Fleet Impact of Potential Tariffs

April 9 Update: The President increased the tariff on Chinese imports to 104% (up from the previous 54%); China announced a reciprocal tariff of 84% on all U.S. imports beginning April 10. 

The Current Landscape 

Since taking office in January, implementing a new trade policy has been a key initiative for the President. In early February, the administration announced it would impose new tariffs on imports from Canada and Mexico (25 percent) and increase pre-existing tariffs on Chinese goods by an additional 10 percent.  

After a brief delay, these tariffs went into effect on March 4. However, for U.S. imports from Canada and Mexico, all goods that comply with USMCA production rules are currently exempt from these tariffs (with some exceptions). Additionally, on April 2, the President increased tariffs on Chinese goods to 54%. This is comprised of the previously existing 10% tariff, the additional 10% announced in February as well as the newly announced 34% tariff, totaling 54%.  

It is also important to note that the various tariffs (country/region, automotive imports, raw materials, etc.) are not cumulative and do not “stack” on top of each other.  

In response to these U.S. tariffs, China announced a reciprocal tariff of 34% on all U.S. imports beginning on April 10 and on April 3, Canada announced a 25% tariff on vehicles imported from the U.S. 

As a result, as shipments from these countries arrive at U.S. trade ports, these goods are now subject to increased tariffs with importers incurring additional costs. Undoubtably, these costs will be passed on to consumers and will increase prices across the industry. 

The Immediate Impact of Tariffs

Initially, the most direct impact will be felt in the parts market. In recent years, the total market share of parts sourced from China, both original equipment manufacturer (OEM) and aftermarket, has grown significantly, reaching $10 billion in 2024. While cost increases are expected to be marginal for the typical consumer, they will have a more pronounced impact on commercial fleet operators, affecting a variety of maintenance and repair costs as well as upfitting expenses. 

Projecting the specific impact on parts imported from China is difficult given the complexities of the supply chain. However, fleet operators should anticipate that common parts imported from China could see increases of 5-10 percent in the near term. 

Forecasting New Vehicle Costs

Perhaps the number one question being asked by virtually all fleet operators is “how will tariffs impact the price of new vehicles?”. While there is no clear answer to this question given the highly complex nature of the automotive supply chain, we can leverage economic data to provide an initial forecast. 

Analyses from a number of economists points to an average increase of $3,000 to $3,500 per new vehicle sold in the United States. However, some foreign-made vehicles, could see an increase ranging from $5,000 to $15,000 depending on the model. It is also important to note that these forecasts are based on vehicles from across the cost spectrum and higher priced models may see an even greater increase. For example, some popular medium- and heavy-duty trucks could see an increase of $15,000 or higher per vehicle. 

For those operating in Canada, new vehicle prices may increase even further. Less than 10 percent of the new vehicles sold in Canada are produced in the country with the majority of the most popular models imported from the United States. Even the vehicles produced in Canada include significant parts and components imported from the U.S. With potential retaliatory tariffs looming, forecasts indicate vehicle costs in Canada could increase by $12,000 (CDN) with some models rising as much as $25,000 (CDN). 

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%.  

Potential for Supply Chain Disruptions

The introduction of tariffs will also likely disrupt the seamless flow of goods and raw materials across the industry’s well established supply lines. If/when manufacturers and suppliers begin to seek alternative supply routes or sources to mitigate the financial impact of these tariffs, there is the potential for production delays (as well as increased operational expenses). 

Increasing costs are also poised to directly impact consumer sentiment and spending. As a result, there will likely be a decrease in demand for new vehicles and manufacturers may opt to reduce overall production, particularly on models heavily impacted by tariffs. From a fleet operator’s perspective, this could lead to certain models having limited availability and/or production delays. 

Holman is Ready to Help

Current economic conditions and tariffs remain extremely volatile, and Holman is monitoring the situation closely. We continue to collaborate with our partners across the automotive industry to stay ahead of potential shifts in pricing and supply chain performance to ensure our account management and consulting teams are ready to help our customers effectively navigate these rapidly evolving macroeconomic trends. 

Additionally, Holman is actively developing strategies to help our customers adjust accordingly and minimize the impact on their business. To have the latest industry news and fleet insights delivered straight to your inbox, be sure to subscribe to Holman’s Morning Brake newsletter.