Understanding the Tariffs
In recent times, tariffs imposed by the U.S. administration have generated considerable debate, particularly regarding the automotive industry. The significant point is that almost every car available for purchase in the domestic market contains components sourced from foreign manufacturers. According to the Department of Transportation, vehicles from the model year 2025, for instance, had at least 20% of their content derived from outside the U.S. and Canada.
Effects of the Chicken Tax
The 25% chicken tax, introduced in 1964 as a retaliatory measure, serves as a historical example of how tariffs can influence vehicle availability and pricing. This tax has led to a notable decrease in the number of foreign-made commercial vehicles and light trucks entering the U.S. market. While full-size trucks are immensely popular among American consumers, compact and mid-size options have faced limitations, primarily due to the importation costs associated with tariffs.
Predicted Price Increases and Market Dynamics
The introduction of new tariffs could potentially escalate new car prices by anywhere from $3,500 to over $12,000, as analyzed by the Anderson Economic Group. In February, the average price of a new car was reported at ,720 on Cars.com, coupled with high financing interest rates. Such price increases may compel buyers to consider the used car market, which is already under pressure due to previous production limitations during the pandemic.
Moreover, these tariffs may disrupt the entire supply chain, leading to a diminished availability of desirable vehicles. Disruptions at the borders can cause significant delays, further exacerbating the situation.
