U.S. automakers were granted a one-month reprieve from a 25% tariff on vehicles imported from Canada and Mexico, President Donald Trump announced Wednesday.
Trump agreed to the pause at the request of General Motors Co., Ford Motor Co. and Stellantis, White House press secretary Karoline Leavitt told reporters during an afternoon briefing.
“The president is giving them an exemption for one month so they are not at an economic disadvantage,” Leavitt told reporters. Reciprocal tariffs, however, will go into effect on April 2, she said.
That action in effect fires a starting gun for consumers in the market for a new car or truck to get off the starting line of their search and make a decision.
That’s because the effect on vehicle pricing caused by tariffs placed on imports from Canada, Mexico and China won’t be seen for months, according to several analysts and industry reports. With this new one-month delay, it buys consumers a little more time.
While the tariffs could trigger price hikes anywhere from $9,000 to $12,000, those price hikes will only apply to vehicles that haven’t yet been built, or haven’t crossed the borders. That means, inventory of new vehicles now on dealer lots may be the best hedges against the expected future sticker shock.
“The good news, for now, is that new car inventory is robust, up 12% compared to a year ago, giving shoppers the ability to snag models at pre-tariff pricing or choose other options,” wrote Kevin Roberts, director of economic and market intelligence at vehicle marketing site CarGurus.com in its February 2025 Intelligence Report, released Wednesday.
Indeed, dealers right now are well-stocked for the annual spring selling season. Inventories rose 5.7% last month since January to an 84 day supply, according to the CarGurus report. That’s a 9.5% increase over February, 2024.
Current used vehicles now on lots are also exempt from tariffs and provide another avenue of savings, but the choices are becoming thinner. While the 45.2 days supply in February was about flat with the same month a year ago, it’s down from 49.5 in January, an 8.7% drop from January, according to CarGurus.
But, as a sales person might hawk, consumers need to act now before it’s too late. Once the tariffs do kick in, prices on vehicles from Canada, Mexico and China will kick up by thousands of dollars.
The average list price last month was $48,900 according to the CarGurus report. But that would balloon to $52,500 once the cost of tariffs are folded into the price, affecting 30% of the vehicles sold in the U.S.
By only pausing tariffs on imported vehicles that would indicate Pres. Trump intends to eventually impose them, unless some sort of compromise or deal is struck before the one-month reprieve expires.
The added cost would come just as consumers were enjoying a slight break from rapidly rising transaction prices as automakers laid on incentives to move growing inventories. The result is likely to be a chilling of the overall market, according to Charlie Chesbrough, senior economist at Cox Automotive.
“Just as the industry seemed to be finding stable ground, new obstacles are thrown in place. How long higher tariffs are held in place is the industry’s big question right now,” wrote Chesbrough in a research report published Tuesday. “Higher prices and border disruptions could result in lower volume. Our forecast of 16.3 million new-vehicle sales in 2025, at least at this moment, is now in question.”
Just how severely import tariffs would affect sales and the industry depend on how long they remain in place.
Production of some vehicles would slow down or cease completely if tariffs are in place for zero to eight weeks, according to a report by S&P Global Mobility.
But should they remain in place long-term, it could trigger what S&P terms “Tariff Winter.”
“In a Tariff Winter we would expect to see re-sourcing, due to the sub-optimal sourcing increasing the cost of manufacturing, North American light-vehicle sales could decline by 10% for several years with a long-term decline in competitiveness. The decline is likely to be 10% in the US, 8% in Mexico and 15% in Canada,” the S&P Global Mobility report envisioned.
That’s a pretty dire outlook, but the organization expects only a 10% chance of a Tariff Winter setting in, which would cast a deep chill, over the normal transition to the traditional sales spikes of Spring.
