Car buyers should be ready for sticker shock when kicking the tires on a new ride in 2025, thanks to new tariffs from the Trump administration.
“A 25% tariff on imported cars could raise the price by $5K to $15K (assuming car values of $20K to $60K that are subject to tariffs for illustrative purposes, although we acknowledge some vehicles could fall outside this band),” warned Goldman Sachs autos analyst Mark Delaney on Friday.
Trump said Wednesday the US will impose 25% tariffs on imports of cars and car parts, to take effect on April 3. The measures will apply to both finished cars and trucks.
“This will continue to spur growth that you’ve never seen before,” Trump said from the White House about the new tariffs.
According to estimates from Cox Automotive, half of the 50 best-selling models in the US would be directly impacted by the tariffs.
Investors and Wall Street don’t appear to agree with Trump, given the response in markets.
The tariffs could increase production costs for automakers and dampen demand by raising prices for consumers. About half of all vehicles sold in the US are imported.
Shares of the Big Three US automakers, which build vehicles abroad, hit the skids on Thursday. General Motors (GM) and Ford (F) fell 7.4% and 3.9%, respectively, while Europe-focused Stellantis (STLA) dropped 2%.
At close: March 27 at 4:00:02 PM EDT
Shares of all three continued to be under pressure in pre-market trading on Friday.
The tariffs announcement caused JP Morgan (JPM) to slash ratings and estimates on the auto sector, citing “material” earnings risk.
Luxury carmaker noted it won’t be immune either.
In a statement, Ferrari (RACE) said that it may raise prices by up to 10% to reflect the higher tariffs. Ferrari reaffirmed its financial outlook for 2025 but noted the risk that EBIT and EBITDA margins could face a 50 basis point reduction.
Goldman’s Delaney says even locally made automobiles may see sharp sticker price increases, reflecting the higher cost of parts.
“Moreover, assuming about 50% of parts content in US made cars is foreign (per the White House fact sheet), a 25% tariff could raise the cost of locally made vehicles by roughly $3K-$8K prior to any offsets (assuming costs of $20K to $60K for a typical vehicle for illustrative purposes, although some vehicles would fall outside of this band), although we’d note that tariffs, at least for now, would only apply to certain auto parts and thus the actual tariff costs on auto parts may be somewhat lower than this,” Delaney explained.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
