Despite tariffs, car prices aren’t shooting up. That’s not necessarily a good thing

Tariffs are costing automakers billions, but they’ve announced little in the way of car price hikes. While that’s good for car buyers, it’s not necessarily good for the American economy.

Tariffs are costing automakers billions, but they’ve announced little in the way of car price hikes. While that’s good for car buyers, it’s not necessarily good for the American economy. Costs have ballooned for car companies after the Trump administration imposed 25% tariffs on imported cars — nearly half the US car market — as well as an additional 25% on imported parts, which every car built here depends on. Automakers would raise prices by double-digit percentages if they could – but there doesn’t appear to be enough demand. And given the importance of car sales to the US economy – the industry is estimated to contribute more than 4% to overall GDP — soft demand for cars could be another recession warning bell. “We are definitely calling for an economic slowdown due to the tariffs,” said Erin McLaughlin, senior economist with the Conference Board, a research firm known for tracking consumer confidence. “This is another way we’re going to have an economic slowdown.” And that’s an effective, if somewhat painful, check on car prices. “We’re getting signals right now that none of (the automakers) are expecting to push the full cost of tariffs along to consumers,” said Jonathan Smoke, chief economist for Cox Automotive. “They understand that this isn’t an environment that regardless of prices moving up, that people are still going to buy.”