Carmakers Use Stealth Price Hikes to Cope With Trump’s Tariffs

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“With a new product, having a higher price is not ‘raising price’ in the game of semantics,” said John Murphy, an analyst with Bank of America Corp., at an event in Detroit Wednesday. “So they don’t really enrage certain folks that might come down on them for raising price.”

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All of these changes — the sticker price increases, reduced incentives and higher fees — will become more visible to car shoppers in the coming weeks. Since the 25% levies went into effect on April 3, dealers have been selling from a shrinking stockpile of pre-tariff cars. (There’s an exemption for cars that comply with the terms of the US, Mexico and Canada free trade agreement, which only face an import tax on their non-American content.) That process is nearly done, and by late June, dealers will face the new reality of lots filled with cars that cost more to bring into the country.

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“There’s nothing they can do to prevent this from having an impact,” said Sean Tucker, editor of Kelley Blue Book. “There’s not a single cliff, but the date they run out of those pre-tariff cars, that’s when you’re going to see the most dramatic change.” 

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Sales may suffer as a result. A recent survey from CarEdge.com found that 65% of new car buyers would walk away if monthly payments rose just 5% in a market where car prices are already near historic highs. An Edmunds survey released Thursday found three-quarters of car buyers said tariffs would be a factor in their purchasing decisions. Shoppers are already not getting the deals that were commonplace just months ago.

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Take the Ford F-150 pickup, America’s top-selling vehicle. Earlier this year, an F-150 could be had with a 1.9% interest rate on a 6-year loan, Smith, the Kansas dealer, said. Then, Ford only offered that rate for certain, higher-priced trim levels of the truck. Now, 1.9% financing is offered only on three-year loans, which are rare.“The dealers I’m talking to have every expectation that in the next 90 days to six months, there will be pretty significant price increases across the board,” Smith said, “assuming something doesn’t happen with the tariffs.”

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Some dealers are preparing for that day of reckoning by making as much money off their pre-tariff inventory as they can, charging over the sticker price. “Dealers set final prices, and they’re dealing with the knowledge that for every car they sell, it’s going to cost them more to replace it than it used to,” Tucker said.

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Automakers might not just raise prices on the cars they import. They may choose to increase the costs of their more expensive, US-made models so the full weight of the tariffs doesn’t fall on some of the cheaper vehicles they make overseas. General Motors Co., for example, imports more than 400,000 cars each year from its factories in South Korea, including the $20,500 Chevrolet Trax.

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“GM doesn’t necessarily have to raise the price of the Chevy Trax by 25% in order to pay a 25% tariff on the Chevy Trax, because those buyers are the most price-sensitive,” Tucker said. “So maybe instead, you bump up the price of the Silverado pickup in order to pay the tariff on the Trax. But GM isn’t going to put that on a window sticker.”

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Automakers may also drop the most affordable trims of their vehicles. Stellantis NV decided to pause making the entry-level version of its electric muscle car, the Charger Daytona R/T, because of tariff risks, the company confirmed in May. The R/T, built at an assembly plant in Windsor, Canada, currently starts at $59,595, while the more powerful Scat Pack trim starts at $73,190.