It's here, after months of speculation, threats and fearmongering: The Trump administration's 25-percent tariffs on virtually all goods entering the U.S. from Mexico and Canada are now in effect.
For the automotive sector, the consensus among industry stakeholders, watchers and analysts is broad: the consequences will be catastrophic. The U.S. administration's objective is to bring automobile production more fully back on home soil. That is not something that could happen quickly, and it may not even be possible. The parts that make up a vehicle come from all over North America, and the supply chain is complex; many components cross the border several times before ending up in a vehicle.
Economic experts are unanimous: the tariffs are not a good idea, to put it politely.
Across the automotive industry, the fear is real. The potential impact on new vehicle prices is obvious and real; those could – almost surely will - rise by thousands of dollars on both sides of the border, because there will be counter-tariffs. American and Canadian consumers alike will be impacted.
Some industry analysts even predict that automobile production could be forced to come to a halt in the near-future. If high new-vehicle prices make consumers stop buying them, automakers will stop producing them to avoid running up large inventories.
If that happens, and if tariffs remain in place for any length of time, it could also have a significant impact on used car prices. We use the conditional tense, because if there's one thing the first few weeks of the Trump administration have taught us, it's that the latter is unpredictable and improvises at times, not to say often.
But there’s little doubt that if tariffs remain in place, we can expect used car prices to rise again, much as they did during the pandemic. The equation is simple. With new vehicles more expensive and increasingly inaccessible, many consumers will turn to second-hand vehicles. Since demand is likely to be strong, prices will climb accordingly.
We'll be keeping a close eye on the situation, of course, and reporting regularly on the various shockwaves that will be felt across the industry as these tariffs make their impact felt.