Now Is Not A Good Time To Buy A Car And It's Donald Trump's Fault

With a new president sitting in the Oval Office — and plenty of policy changes happening at the federal level — there's bound to be concern over how new priorities will ultimately affect the American consumer. This happens, at least in small ways, with every new administration. However, with Donald Trump behind the Resolute Desk yet again there has been a whipsaw effect as consumers and businesses across the entire world wait with baited breath to try and make sense of his new policy objectives.

President Trump has quickly targeted a range of trading partners with the goal of transforming the country's relationship with them. Specifically, applying tariffs to important goods from Mexico and critical materials from Canada has been a key focus for the administration. However, consumers ultimately pay for tariffs. It's worth noting that economists resoundingly agree that trade wars are bad for national economies — and the people who live in them, both in the short and long term. 

One specific way this negative impact is playing out can be seen in the new car marketplace. According to Cars.com's 2024 American-Made Index, 66% of the cars in the American market were from foreign automakers. Perhaps even more importantly, according to the CATO Institute, 47% of vehicles imported to the U.S. in 2023 were made in either Mexico or Canada. Trump's adoption of such an aggressive tariff policy, especially with our neighboring trading partners, will only serve to raise the prices of numerous essentials, cars being one of them.

A battle over the nature of imports and exports is far less clear-cut than a standard conflicts. When dealing with trade policies, the negative effects sometimes happen all at once, but oftentimes more complex consequences take far longer to fully reveal themselves. Beyond the addition of tariffs on imported cars and car parts, the Trump administration has also targeted Canadian steel and aluminum. Added tariffs on steel imports will affect the cost of building new vehicles in American factories. But it will also impact the construction industry, American toolmakers, aviation, and a wide range of other industries since there is no substitute for steel in a great many uses. The result of tariffs placed on these kinds of imports will be higher prices across multiple industries — especially new vehicles in all corners of the auto marketplace. 

New cars will be the most affected today, with price increase estimates ranging anywhere from $2,000 to $12,200 as a direct result of the administration's trade policies. As a baseline, however, buyers should also be aware that new vehicles are expected to now cost roughly 25% more than they would have otherwise thanks to tariff-based increases in materials and parts. All of this is to say that buying a new car is set to become a far more painful experience.

Stock market retraction and price increases are just some of the consequences that arise during a trade war. People will ultimately have to spend more if they want to buy the same range of goods as before, and the available cash they have on hand is likely to be more limited. However, trade wars can seep into a huge variety of other economic aspects. Economists agree on a scattershot pattern of collateral damage when it comes to expansive trade conflict. Moreover, this will only be made worse by the fact that the administration's tariff priorities aren't contained simply to small scale products or industries. Instead, the government has sought to impose import taxes across the board.

It's worth noting that the administration has repeatedly announced new tariff policies only to then walk them back a few days later, potentially signaling that this stance is a short term approach. However, the government has also continued to speak about its policies in positive terms with undefined deadlines, giving investors pause and making businesses across the country wonder what will come next. Vast GDP shrinkage is likely one outcome — In fact, it is a consistent byproduct of trade war policy and has happened throughout history. While new cars are one of the frontline products being affected by these changes, they won't be the last.