The automotive industry is facing major disruption after the U.S. introduced 25% tariffs on imported vehicles and car parts.
While the goal of the policy is to boost domestic manufacturing in the long run, the immediate effects have been swift and widespread—disrupting supply chains, driving up costs, and prompting cautious responses from manufacturers.
Key Brands Halt U.S. Shipments Amid Uncertainty
Several leading automakers have already taken decisive steps in response to the tariffs. Jaguar Land Rover has confirmed a one-month pause on all exports to the United States. In a statement, the company acknowledged the U.S. as a key market but explained the move as a necessary step while assessing new trading terms and developing mid- to long-term plans.
Lotus, Volkswagen, Audi, and Porsche have also paused shipments to the U.S., citing uncertainty over tariff structures and their potential long-term implications. Audi issued a dealer memo confirming that all vehicles arriving at U.S. ports after April 2 will be held. Only cars that cleared customs before that date will reach showrooms, clearly marked to indicate they are exempt from tariff-related price increases.
One big concern is the Audi Q5, which is made in Mexico but doesn’t qualify for the US-Canada-Mexico trade deal. That could lead to combined tariffs of up to 50%—a serious extra cost that could put off both buyers and dealers.
Dealerships Feeling the Pressure
Car dealerships are on the front line of this disruption. With shipments on hold and stock becoming limited, many retailers are already seeing a squeeze on inventory, particularly for high-demand import models. This is making it increasingly difficult to meet customer expectations, both in terms of vehicle choice and price point.
The timing of the tariffs has further complicated matters, coinciding with what is typically a strong sales period in the spring. While some dealerships are benefitting from a temporary spike in pre-tariff sales, the longer-term outlook points to a challenging sales environment as supply constraints intensify and affordability becomes a growing concern.
Many retailers are now turning their attention to the used vehicle market to fill gaps in new car availability. However, this new surge in demand is also pushing up prices, making it harder to find competitively priced second-hand vehicles. Dealers without efficient sourcing strategies are at risk of falling behind.
Market Reactions Already Underway
As shipments slow and inventory tightens, the pressure on both new and used car prices will intensify. Vehicles affected by the full 25% import tariff may rise in price by 10–15%, with others increasing by up to 5%. Dealers are bracing for a more competitive and cost-sensitive landscape, where every sale becomes harder to win.
To stay resilient, dealerships will need to become more agile in how they source vehicles and connect with customers. Clear pricing, flexible finance options, and smart use of digital tools will be essential for protecting both volume and margins in the coming months.
Manufacturing Jobs Still in the Balance
While the administration’s aim is to drive domestic production, automotive executives have been clear: large-scale reshoring is neither quick nor straightforward. Factory conversions, new plant builds, and restructured supply chains require years of planning and substantial capital investment. Uncertainty around the longevity and structure of these tariffs makes such commitments even more difficult.
In the meantime, temporary production halts and job cuts are being seen across North America, as firms adjust to the new cost pressures and potential retaliatory trade actions.
