Car Dealerships Across the U.S. Brace for Impact as Tariffs Take Effect

Yahoo

03-04-2025

In a move that will have a strong impact on car buyers in the coming months, the Trump administration has launched on imported cars, light-duty trucks, and auto parts.
The previously announced 25 percent tariff on vehicles started on April 3, and tariffs on parts will start May 3, .
We spoke with several dealers to see how they plan to respond.
President Trump's executive order for a 25 percent tariff on all cars and light-duty trucks imported into the U.S. took effect as of Thursday, April 3. While the current administration says it's going to stick, some industry analysts are skeptical, and speculation is high enough to wonder if Las Vegas bookies are taking bets.
But as of this moment, the tariffs are a go, and dealerships across the country are figuring out how they're going to respond.
But wait: there's more. As reported by the Associated Press, the administration is levying additional tariffs above and beyond the increase on auto imports, plus levies against China, Canada, and Mexico. The White House is also demanding expanded trade penalties on steel and aluminum and tariffs on countries that import oil from Venezuela. Plans are in the works for additional import taxes on pharmaceuticals, lumber, copper, and computer chips.
"The final assembly is one point on the supply chain and the dealer is another point, and it has yet to be seen who will bear these ultimate costs," says Will Hardeman, managing partner of Continental Automotive Group. "I think it will be shared across the board."
Some dealer owners, like Kenny Covert in Texas, are cautiously keeping the faith.
"Ultimately, when our price goes up, unfortunately consumers' prices go up," says Covert, managing partner for Covert Auto Group. "But also, I think Trump is a businessman. I don't think he'll let the Big Three sales go out of whack."
General manager at Mercedes-Benz of San Antonio Chris Martinez says operations will continue as normal, because it's still a bit early to determine the full impact.
"All current inventory in stock is unaffected by the tariffs, but incoming units will be subject to them," Martinez says.
It's possible that some models may be discontinued because of the tariffs, he speculates. In most cases, Martinez believes the tariff will likely be reflected on the Monroney price sticker in a similar manner to a transportation fee.
Hardeman thinks manufacturers will adapt to make their products more affordable.
"In some cases, the industry got into a feeding frenzy by putting too many options and equipment on their cars," he says. "They achieved good margins but they might need to offer more basic versions of cars. The industry has gotten into upfitting cars with lots of fancy options."
For instance, top trims of Ford F-150s and Chevy Tahoes are creeping into the $80,000 range and up, Hardeman points out, which is a radical departure from the base price. Manufacturers may have overshot the market and made the cars less affordable, Hardeman posits.
"Things are going to get more compressed with more tariffs," he says. "But I will say this: I'd say 80 percent of the models I sell today are built in America, even the Subarus and Hondas and the majority of Mercedes-Benz models are built in America. Final assembly is in America but the parts are often imported from Mexico, Canada, or Europe. Say we have a 25 percent tariff; that could affect prices 10 to 15 percent, as a really rough ballpark figure."
Dealers across the country are reporting an increase in foot traffic as consumers seek to buy their new vehicle before the imposition of tariffs. Supporting this anecdotal evidence is data from AutoPacific, an automotive market research firm, which conducted a survey of new vehicle shoppers at the end of March 2025. The data revealed that 18 percent of new vehicle shoppers nationwide planned to pull ahead their new vehicle acquisition to avoid higher prices resulting from the expected tariffs.
"Many automakers have anticipated this spike in demand and have built and shipped in as much inventory as possible from non-U.S. auto plants before the tariffs hit," says AutoPacific president Ed Kim. "So despite the spike in demand, there has been no shortage of good deals on pre-tariff imported vehicles leading up to the April 2 announcement."
United Auto Workers President Shawn Fain has (so far) shown support for the tariff order, which he says will boost American profits.
"We applaud the Trump administration for stepping up to end the free trade disaster that has devastated working class communities for decades. Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today's actions,"Fain said in a statement on March 26.
Others are less than enthusiastic, like Ford dealer Jim Seavitt. The dealership ownertold the Detroit Free Press that his Michigan operation is down 50 percent in leads and already, "everything's off 40 to 50 percent."
"It reminds me of 2008 when the mortgage crisis hit," Seavitt said. "It's looking like it's the start of a crisis."
Hardeman of Texas is presently maintaining a steady hand on the wheel.
"As of now, at this moment, we really aren't doing anything proactive," he says. "Car dealers are good at reacting to conditions in the marketplace. Whether things are getting more expensive or we have limited supply or excess supply, we have to curate our offerings and inventory according to consumer demand. This is no different."
Covert's business was established in 1909, and he has the benefit of generations of experience on weathering the storms of the market.
"I got into the business in 2000, so I saw what happened after 9/11; we had a big dip for a while," he says. "I was able to listen to my dad and uncles about running lean and watching expenses, which is Business 101. I was in management by 2008–2009 and operated the same way: you have to run lean, work smarter, work harder, and put in more hours."
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