US car buyers face higher prices, less choice under Trump's tariffs

«Most car makers can't eat 25%, they just can't,» said Andy Palmer, former CEO of Aston Martin. «That means car makers will pass on as much of the cost of tariffs as they can,» including by removing features to lower their costs while also raising prices.

Automakers may spread that cost between U.S.-produced and imported models, cut back on features, and in some cases, stop selling affordable models aimed at first-time car buyers, as many of those are imported and less attractive if they carry a higher price tag.

The changes could price more Americans out of the market. S&P Global Mobility estimated Thursday that tariffs will cause annual U.S. vehicle sales to fall to a range of 14.5 million to 15 million in coming years from 16 million in 2024. Cox Automotive estimates tariffs will add $3,000 to the cost of a U.S.-made vehicle and $6,000 to vehicles made in Canada or Mexico without exemptions. While luxury sellers like Bentley or Ferrari say they will pass on costs, major automakers' typical margins of 6% to 8% leave little wiggle room. Affordable models most likely to be affected include the Honda CR-V, Chevy Trax, Subaru Forester, Chevy Equinox and Honda HR-V, said Erin Keating, executive analyst at Cox.

«Car makers know they have certain vehicles in their portfolio that can tolerate lower profit margins,» Keating said. «Some vehicles may just prove to be too expensive, and most of those are affordable models manufactured outside the U.S.»

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After 10% of the car-buying population was priced out of the market during the coronavirus pandemic, affordability still remains high on consumers' minds, Keating said.

«Would tariffs bite into another 10% of people who would be priced out?» she said.