Car buyers in the U.S. could face substantial increases in the cost of not only Mexican-made vehicles, but those assembled in the U.S., as a result of new tariffs President Donald Trump said he will begin levying on imports from Mexico starting June 10.
Should the tariffs reach the full 25 percent by Oct. 1, as Trump proposes, some Mexican-made vehicles could see a sticker price increase of more than $10,000, and even vehicles built in the U.S. using Mexican-made could see price hikes in the hundreds, even thousands, of dollars, according to industry experts.
“Imposing new tariffs on Mexico really means imposing a new tax on American consumers, raising prices on everything from produce to pick-up trucks,” said Cody Lusk, president of the American International Automobile Dealers Association. “Tariffs on Mexican imports will result in self-inflicted damage that the U.S. auto industry, which supports 7.25 million American jobs, is not prepared to absorb.”
New car prices are now at record levels, according to LMC Automotive, which estimates the average total for a new vehicle will be $33,457 in May, up 4 percent from a year ago.
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At the same time, the U.S. new car market is in an accelerating slump. Sales for this month are expected to be down around 2.1 percent, LMC forecast.
The auto industry will get "hammered," Joe Phillippi, head of AutoTrends Consulting, told NBC News. Adding any tariffs to already rising prices could result in a “rout."
Any new tariffs on Mexican auto imports would be felt by a wide swath of American automotive buyers, even those who buy U.S.-made products, as well as those carrying European and Asian brand names.
Mexico has risen, over the past decade, to become one of the world’s largest automotive manufacturing bases, with dozens of car and component plants spread across the country. These include the recently opened Audi plant in Puebla that serves as the global source for the latest-generation Q5 SUV, and the huge Nissan complex in Aguascalientes.
Nissan sourced about one-third of the vehicles it sold in the U.S. last year — models such as the Sentra sedan — from its two Mexican factory complexes. Assembly operations in that country serve as major sources for nearly a dozen other automakers.
Even vehicles assembled in the U.S. could be impacted by the new tariff because it has become the norm to use at least some Mexican-made parts and components, especially those with relatively high labor content. About 70 percent of the wiring harnesses used on U.S. assembly lines come from Mexico.
How much prices will rise is uncertain. Manufacturers could choose to absorb some of the tariffs — but that would hurt already weakening bottom lines, Phillippi and other analysts warned. But costs would go up, one way or the other.
Take a typical Chevrolet Silverado or Ram 1500 pickup produced south of the border and priced at $40,000. With a factory cost of around $30,000 when shipped off to American showrooms, that would mean an extra $1,500 in duties as of June 10 and $7,500 by next October if the situation isn’t resolved. And for those trucks with a sticker price approaching $100,000, tariffs could well exceed $10,000.