It has never been more expensive to buy a new car. The average transaction price last month for buyers in the United States was $48,576, up nearly a third from 2019, according to Edmunds. The “affordable” car—$20,000 or less—is dead.
The high prices have been pinned on plenty of economic dynamics: lingering pandemic-era supply chain issues, the introduction of expensive technology into everyday cars, higher labor and raw materials costs, and new tariffs by the Trump administration affecting imported steel, aluminum, and cars themselves.
Now, despite a US Supreme Court ruling that will nix some of those Trump tariffs, car buyers will likely get no respite.
“The core cost structure facing the auto industry hasn’t fundamentally changed overnight,” writes Jessica Caldwell, Edmunds’ head of insights, in an emailed statement. Put more simply: Cheaper cars aren’t coming, at least not because of this ruling.
The Supreme Court’s decision gets in the way of the president’s power to use the International Emergency Economic Power Act, or IEEPA, to levy tariffs in response to emergencies. Trump used this power to apply tariffs to countries around the globe, the emergency being “large and persistent” trade deficits. The administration applied other new duties on Canada, China, and Mexico because of what it called emergencies related to the flow of migrants and drugs into the United States.
But most of the tariffs that affect the auto industry come from another law, section 232 of the Trade Expansion Act. That provision can apply to imports that “threaten to impair” the country’s national security. Tariffs on steel, aluminum, copper—key raw materials for cars—and imported auto parts and vehicles themselves came under this provision, and are still in effect. This includes 15 percent tariffs on cars built in Europe, Japan, and South Korea.
Automakers have actually done an OK job shielding consumers from the effects of tariffs, Caldwell says. Even as retailers have blamed tariffs for steadily rising prices of consumer goods like electronics and appliances, car prices are up just 1 percent since this time last year, the firm’s data shows. But as the tariff regime drags on, that could change in ways that make new car buyers even less happy.
“If cost pressures continue to build, automakers may have less room to shield shoppers from higher prices,” Caldwell says, “but for now, the broader market impact is still playing out.”
Read the full article here