The Trump administration’s proposed 25% tariff on imports from Canada and Mexico threatens to significantly impact car prices in the United States. The tariffs, which could take effect as early as Saturday, would not only apply to vehicles assembled in these countries but also to those made in the U.S. due to the reliance on Canadian and Mexican parts in American-made vehicles. Experts predict that these tariffs would immediately increase production costs, which would eventually lead to higher prices at dealerships.

The North American automotive industry has long functioned as an integrated market, with vehicles and parts freely crossing borders under agreements like NAFTA and the USMCA. This interconnected system means that even cars built in the U.S. are dependent on parts sourced from Canada and Mexico. With tariffs applied, automakers may be forced to slow down production or shut down plants to avoid the escalating costs. This could lead to a vehicle shortage, further driving up prices.

Car dealerships will likely respond to the anticipated supply shortages by becoming more firm on pricing. Within weeks of the tariffs going into effect, consumers in the U.S., Canada, and Mexico could be faced with thousands of dollars in added costs for each vehicle, as manufacturers and suppliers will pass these costs onto the end buyer. As car prices continue to rise, the impact of these tariffs will be felt most by consumers in all three countries.