Tax facts

27 Mar 2025 2 min read

Daily update

US President Trump announced an aggressive tax increase for US consumers, with a 25% tariff on imported cars. Officials later clarified it also covers car parts. The tax will raise US inflation and lower growth, but the full impact will take time.聽
It is tempting but incorrect to compare the 25% tax with the 24% post-pandemic auto price increase. The tax applies to import prices but not later supply chain costs鈥攃onsumer prices will rise less than 25%. US consumers will likely hold onto their existing cars for longer, and may switch to buying used cars, so used car prices will rise. Higher new and used car prices eventually increase auto insurance prices鈥攖his tax affects people who do not buy a car at all.
Slower US growth will impact car exporters to the US. Whether car exporters lose market share depends on how US companies react. If US car manufacturers raise prices using tariffs as an excuse, there is less of a growth hit to the rest of the world.
Final 4Q GDP data is due from the US, and is expected to be stable at around trend growth. February US wholesale and retail inventory data becomes more important鈥攊nventories have the potential to offer short-term relief from the tax increases.