Trump announces 25% auto tariffs. What it means for California car buyers
Car prices saw a dramatic upswing in the aftermath of the pandemic. Now, experts are warning consumers to prepare for more price hikes spurred by a new tariff on auto imports.
Starting April 2, President Donald Trump is set to impose a 25% tariff on imported passenger vehicles, light trucks and some auto parts. For imported cars protected by the United States-Mexico-Canada Agreement, only the foreign parts that make up the vehicle will be subject to the tariff.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth,” Trump said inside the Oval Office, later adding that the tariffs will "spur growth like you haven’t seen before.”
The move follows a temporary tariff exemption granted earlier this month at the behest of three large U.S. automakers. After the monthlong reprieve, auto experts say higher prices are likely on the horizon.
"You're going to see price increases," said Ivan Drury, director of insights at automotive research site Edmunds. "It's such a shotgun approach. Virtually nothing goes unscathed."
What are the most popular cars in California?
According to the California New Car Dealers Association (CNCDA), here are the most popular vehicles sold (with total sales numbers) in California in 2024:
- Tesla Model Y: 128,923: Tesla Model Y: 128,923: Tesla Model Y: 128,923: According to Telsa's website, the EV is built in the company's Fremont Factory in California, Gigafactory Shanghai in China, Gigafactory Texas in Austin, and Gigafactory Berlin-Brandenburg in Germany.
- Toyota RAV4: 65,041: The popular SUV is assembled in the United States, specifically at Toyota's Georgetown, Kentucky plant, but parts come from Canada (Woodstock, Ontario) and Japan (Tahara, Aichi, Toyota, Aichi, Ōbu, Aichi), according to Toyota's website.
- Toyota Camry: 55,027. The sedan is assembled in Georgetown, but parts come from Canada and Japan.
- Tesla Model 3: 53,056. The EV is built in the company's Fremont factory and Gigafactory Texas in Austin
- Honda Civic: 42,564. The popular sedan is primarily assembled in East Liberty, Ohio, and Greensburg, Indiana from parts in a global supply chain.
New California Car Registrations By Automaker
According to the DMV, the car brands with the most new registrations in California were:
- Toyota: 289,258
- Tesla: 203,223
- Honda: 192,166
- Ford: 129,798
- Chevrolet: 108,258
What are the 'most American' cars made?
All cars source at least some parts internationally, but some are more "American" than others. Cars.com's American-Made Index ranks the "most American" cars and one brand has topped the list consistently for the last several years: Tesla.
The Tesla Model Y takes the top spot in the index. The product from billionaire and Department of Government Efficiency lead Elon Musk's company has ranked first three years in a row. The list is created using five criteria: assembly location, parts content, engine origin, transmission origin and U.S. manufacturing workforce.
Below are the top 10 "most American" cars according to the index:
- Tesla Model Y
- Honda Passport, assembled in Lincoln, Alabama
- Volkswagen ID.4, assembled in Chattanooga, Tennessee
- Tesla Model S, assembled in Fremont
- Honda Odyssey, assembled in Lincoln, Alabama
- Honda Ridgeline, assembled in Lincoln, Alabama
- Toyota Camry
- Jeep Gladiator, assembled in Toledo, Ohio
- Tesla Model X, assembled in Fremont
- Lexus TX, assembled in Princeton, Indiana
What auto tariffs mean for consumers
In a Wednesday sales forecast call, Cox Automotive chief economist Jonathan Smoke said massive tariff increases would be “highly disruptive” to North American vehicle production, potentially leading to tighter supply and higher prices.
“By mid-April, we expect disruptions,” Smoke said. “We expect sales to fall, new and used prices to increase, and some models to be eliminated if those tariffs persist.”
Drury said price increases will likely vary. Some companies may pass price hikes from the 25% tariff directly to consumers, while others may bear some costs to remain competitive and ease cost pressures in other ways, such as reducing incentives.
But with the tariff expected to hit both imported vehicles and key auto parts like engines and transmissions, Drury said consumers can expect price hikes "across the board." That includes new cars, used cars, maintenance costs and even insurance premiums, since accidents involving new parts would be more costly.
Cars assembled in the U.S. wouldn't be safe from tariffs either, Drury said, as they import parts from other countries.
"There is no vehicle that is 100% American in that regard," Drury said. Used vehicles will see "a bit more lag time, but there will be an effect."
Wedbush Securities analyst Daniel Ives said questions remain on exactly how these tariffs will be applied or whether they will be altered in the coming weeks. In their current form, he estimates they could push up the average car price $5,000 to $10,000, depending on the make and model.
The tariffs "would be a hurricane-like headwind to foreign (and many US) automakers," Ives said in a Wednesday note. But "we continue to believe this is some form of negotiation and these tariffs could change."
If tariffs do hold, they could encourage increased investment in U.S. manufacturing and a more resilient auto industry, according to a note from Jessica Caldwell, Edmunds’ head of insights. But those potential long-term benefits will take time.
"For consumers navigating higher prices in the short term, the promise of future gains may feel distant — at least for now," Caldwell said.
How much does a new car cost today?
The tariffs come shortly after pandemic-era supply chain issues pushed up car prices for U.S. drivers. New vehicle prices are up about 25% since early 2020, according to Kelley Blue Book, with the average transaction price for a new vehicle just above $48,000 as of February.
Meanwhile, higher interest rates have pushed up auto loans, making new-vehicle affordability “a real challenge for most households,” Erin Keating, executive analyst for Cox Automotive, said in a statement earlier this month.
Another report from AAA found the cost the total cost to own and operate a new vehicle was roughly $1,025 per month in 2024, including expenses like maintenance, fuel, insurance, financing and depreciation. That's up more than $200 per month from 2021.