Car buyers looking to snag new wheels will likely be confronted with sticker shock after President Donald Trump’s 25% tax on imported vehicles and auto parts kicks in.

Trump’s tariff on cars and light trucks is set to take effect on April 3 while tariffs on certain auto parts, including engines and transmissions, will take effect no later than May 3.

The tariffs will have a sweeping impact on an industry that runs deep into the economy, upending the supply chains of businesses that consumers heavily depend on, economists said.

Roughly half of the 16 million cars, SUVs and light trucks Americans bought in 2024 were imports, the White House said in a fact sheet about the tariffs. Vehicles in the United States are imported from Mexico, Japan, South Korea, Canada, Germany and other countries.

“If there’s a tariff, there’s no way to avoid what it means,” said Mark Zandi, chief economist of Moody’s Analytics. “Either the vehicle manufacturer raises the price or they suffer in the form of lower profits. Pick your poison.”

Here’s what you need to know:

Why is Trump imposing tariffs on automakers?

The Trump administration says it’s imposing tariffs to strengthen national security and spur the growth of American jobs because automakers would face more pressure to build plants in the United States.

“America cannot just be an assembler of foreign-made parts — we must become a manufacturing powerhouse that dominates every step of the supply chain of industries that are critical for our national security and economic interests,” said White House spokesman Kush Desai in a statement.

The White House noted that the COVID-19 pandemic disrupted the automotive supply chain, forcing carmakers to cut or delay production of vehicles.

“You will see prices going down but specifically because they will buy what we are doing, incentivizing companies and even countries to come to America and build,” Trump said Wednesday when he announced the tariffs.

But building more plants in the United States takes automakers years and some businesses could also be wary of shifting their supply chain to the United States because of regulatory uncertainty, economists said. Some speculate that Trump, who has backtracked on imposing tariffs before, could use tariffs as a bargaining tool to negotiate with other countries.

“Nobody’s gonna win from the tariffs. Everybody’s gonna lose, but some companies will lose more than others,” said Ilhan Geckil, an economist and managing director at Anderson Economic Group.

How much will car prices increase because of the tariffs?

Estimates vary depending on the vehicle, but most industry experts predict new cars will cost several thousands more.

Even if a car is manufactured in the United States, the tariffs also apply to certain auto parts imported from other countries.

Automakers also have to strike a delicate balance because pricing a car too high could prompt consumers to delay buying a new vehicle.

Erin Keating, an executive analyst at Cox Automotive, said consumers can expect a 15% to 20% price hike on vehicles affected by the tariffs.

Even if they’re not affected by the tariffs, the prices of vehicles are expected to increase by 5%, he added.

“As more people come into the market and start looking for vehicles, and there’s competition with vehicles that are having to be priced higher, then the market will potentially bear higher costs, and so therefore you’ll see other vehicles rising in price as well as used car vehicles,” she said.

Zandi said consumers could see car prices increase between $5,000 and $10,000.

Anderson Economic Group estimated in February after Trump announced a tariff on imports from Canada and Mexico that consumers could see a price increase of between $4,000 and $10,000 for most vehicles and $12,000 or more for electric vehicles.

Which car brands will be hit hardest by the tariffs?

European and Asian-manufactured cars could be hit harder than vehicles produced in the United States, but it also depends on how much the automaker relies on parts imported from other countries, according to Anderson Economic Group.

Tesla, for example, makes its cars in the United States, but the company also relies on foreign parts to build its vehicles.

“Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant,”Elon Musk tweeted this week.

Other automakers such as Toyota, Volkswagen, Hyundai and General Motors make their cars both in the United States and other countries.

General Motors Chief Executive Mary Barra said during the company’s quarterly earnings call in January the company builds trucks in Mexico, Canada and the United States.

“With respect to possible tariffs, we are working across our supply chain, logistics network, and assembly plants so that we are prepared to mitigate near-term impacts,” she said during the call.

Hyundai Motor Group said that it’s been expanding U.S. production to 1.2 million vehicles across Alabama and Georgia.

What about car dealers. How will they be affected?

If consumers delay buying a new vehicle because of the higher prices, that could dampen sales at dealerships.

Juri Klaric, a sales manager for a Volvo dealership in Torrance, said the tariffs are so new that their business will have to wait to see what happens.

“It’s a little unknown, in all honesty,” Klaric said.

At the nearby Martin Chevrolet dealership, sales teams are preparing and hoping for a busy weekend as buyers rush to secure lower prices, said sales manager Stuart Monterroso.

But it’s also too early to guess how much this will hit auto sales at dealers.

“Parts come from everywhere — the logistics are massive,” he said.

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