Car Prices Stay Steady Despite Tariffs – But It May Signal Trouble for the U.S. Economy
Despite billions in added costs from tariffs, major automakers have largely resisted raising car prices – at least for now. While this may sound like good news for consumers, experts warn it could be an ominous sign for the broader U.S. economy.
In recent years, the U.S. has imposed steep tariffs – 25% on imported vehicles and another 25% on auto parts. These levies impact nearly half of the American car market, raising costs across the board. Yet, automakers are showing restraint in passing those costs to consumers, a decision largely driven by weakening demand.
“If they could raise prices by double digits, they would,” said Jonathan Smoke, chief economist at Cox Automotive. “But they know this isn’t the kind of market where people will keep buying no matter what.”
According to the Conference Board, consumer intentions to purchase vehicles have fallen sharply. Only 10.5% of Americans now plan to buy a car in the next six months, down from 13.1% late last year. Interest in new cars is even lower, at just 2.4%.
“Consumers are concerned not just about tariffs and inflation, but also about job security,” said Erin McLaughlin, a senior economist at the Conference Board. She added that the dip in car-buying plans is one of several indicators pointing toward an economic slowdown.
The auto industry contributes over 4% to U.S. GDP, making declining vehicle sales a potential red flag for recession.
While official pricing from manufacturers has largely remained flat, some sticker prices are rising. In April, the average manufacturer’s suggested retail price (MSRP) crept past $50,000 – just the fourth time in history, according to Edmunds.
Industry insiders say this increase is partly due to a shift in available inventory. Tariffs are making it more expensive for automakers to import affordable models, pushing them to focus on pricier, more profitable vehicles. Some are even reducing shipments of lower-cost cars to the U.S., which could thin the market and eventually push prices higher.
Still, automakers are cautious. Executives from General Motors and Ford say they expect modest price hikes—about 1% to 1.5% in the second half of the year – but are more likely to absorb costs than risk losing customers.
Ford recently announced price increases of $600 to $2,000 for three Mexico-made models – the Mustang Mach-E, Maverick, and Bronco Sport. The company said the hikes won’t apply to vehicles already on dealer lots and won’t fully offset the cost of tariffs.
Meanwhile, industry leaders are staying tight-lipped about long-term pricing. GM CEO Mary Barra noted that prices fluctuate monthly, depending on market conditions. “We’re going to respond to the market,” she said in a recent CNN interview.
As automakers navigate ongoing policy changes and consumer hesitancy, the stability in prices may not last. But for now, subdued demand is keeping the lid on what could have been sharp increases – an economic reality with mixed implications for buyers and the broader market alike.
