Although the Donald Trump administration is attempting to alleviate the burden on the automotive market through successive tariff negotiations with major trading partners such as the European Union (EU) and Japan, analyses indicate that consumers will not feel a significant relief effect. Despite tariff reductions, new car prices continue to rise, and as demand shifts toward used cars, their prices are also increasing, adding a double burden to the overall U.S. automotive market.

Automotive information platform Cars.com stated in a report on August 27, “Even if the White House finalizes tariff negotiations with major importers, consumers will end up paying more for new car purchases.” Currently, U.S. tariffs on automobiles are mostly 25% for most regions and 27.5% for EU exports. Although preliminary negotiations have agreed to lower the rate to 15%, the path to final agreement remains long, and even if reduced, it will be difficult to significantly ease the price burden.

According to the analysis, if the tariff rate remains at the current 25%, the average new car price would rise by about 13.5% from the existing $48,000 to $54,400, imposing an additional burden of $6,400. Even if the tariff rate is reduced to 15% through negotiations, prices could still jump by approximately 8.1% ($4,300). Considering that auto import tariffs from most countries were only 2.5% before the Trump administration, the impact felt by consumers is inevitably significant.

In fact, during the second quarter of this year, major U.S. automakers recorded a cumulative profit loss of $11.7 billion due to tariff burdens alone. Given that companies cannot sustain such costs in the long term, they will inevitably be passed on to dealerships and consumers.

According to data from the Atlanta Federal Reserve Bank, the average U.S. household income increased by only 1% ($768) over the past year. In contrast, the rise in new car prices has outpaced income growth by 6 to 8 times. As prices soar much faster than income, the burden of car purchases on American consumers is growing. David Green, chief analyst at Cars.com, emphasized, “Affordable prices remain the biggest concern in the market going forward.” He forecasted that with the average new car price already exceeding $52,000 and a 15% tariff applied, many consumers will find it difficult to afford new cars.

In response, manufacturers are introducing entry-level trims and simplified models to provide cheaper options and prevent customer loss. Even Tesla plans to launch a more affordable Model Y SUV this fall, ahead of the end of the federal electric vehicle (EV) tax credit in late September. Green explained, “Most consumers buy cars not because the market is favorable, but out of necessity,” adding, “Rather than forgoing a purchase altogether due to higher prices, they will turn to cheaper models or used cars.” He advised that to mitigate the shock, consumers should consider: ▲ early purchase of pre-tariff inventory vehicles ▲ consideration of lower-trim new models ▲ exploration of “young” used cars (low-mileage recent models) ▲ an open attitude toward various brands, body types, new vs. used options.

The problem is that as the burden of new car prices increases, even the used car market—seen as an alternative—is becoming unstable. According to The Wall Street Journal (WSJ), the average price of 3-year-old used cars has surpassed $30,000, approaching pandemic-era highs. This is due to ongoing supply chain disruptions from COVID-19, combined with rising new car prices from tariff policies, driving consumer demand toward used cars.