With automotive tariffs now in effect, the prospect of them remaining in place for a long period is being considered by all industry players.
The 25-percent tariffs imposed by the Trump administration have started to cause price increases across the industry, and that will only worsen in the coming months.
And as sticker prices at dealerships climb, many consumers will postpone buying a new vehicle to replace their current one. There is no scenario in which new vehicle sales don’t take a hit, on both sides of the U.S.-Canada border. will have a significant impact on new vehicle sales.
We could see a drop in sales of some 1.8 million vehicles this year in Canada and the U.S. That’s the conclusion of an analysis by Detroit-based automotive consulting firm Telemetry.
The long-term prognosis is even direr. The analysis also predicts that if tariffs remain in place until 2035, annual sales could plummet by seven million units per year.
Jobs at risk
Needless to say, that would have devastating consequences for the auto industry and for the North American economy. Imagine the number of jobs that would be sacrificed across all affected sectors.
The tariffs have been in effect for just under a month and already, negative consequences are becoming apparent. Several automakers have paused production in certain locations or outright stopped the delivery of vehicles to the U.S. Some have announced their intention to produce more vehicles on American soil, but that’s a process that takes many years.
Impact on used vehicle prices
In the nearer-term, a jump in new-vehicle prices will have a domino effect on the price of used vehicles. Consumers who can no longer afford a new vehicle will turn to something pre-owned, this while supply is squeezed given that existing car owners will hold on to their vehicle for longer. Increasing demand combined with lower supply will inevitably supercharge used-vehicle prices.