Cloud Theory has written extensively about the effects of the trade wars instigated by the Trump Administration, most notably on new vehicle pricing starting in late February. Prices plummeted throughout the latter half of 2024 and into early 2025. However, as tariff rhetoric escalated and materialized into reality, uncertainty gripped the industry. This forced automakers and dealers to reverse course and hike prices—primarily by reducing incentives and scaling back discounts.
Starting on February 24, Average Marketed Prices surged steadily upward throughout March and into April. After bottoming out at a multi-year low of $48,544 on that date, promoted prices surpassed $50,000 on April 14 and then…stayed there.
There are several related explanations as to why prices have not gone beyond the initial increases:
- OEMs hesitated to take significant formal actions while the new tariff protocols remained in flux.
- Manufacturers rushed to focus on consumer communications championing their continuing affordability.
- Existing inventory that rolled off assembly lines before the tariffs were enacted bought OEMs some runway to postpone price hikes until the overall impact could be calculated and appropriately addressed.
But while the pricing hiatus of the past three weeks has kept Average Marketed Prices just slightly north of $50,000, there are storm clouds ahead that point to additional actions to come. It is likely that we will look back at this most recent period as a temporary respite rather than an enduring trend, as the dynamics noted above are all apt to move the industry in the direction of higher prices.
For one thing, the tariff “rules”—which were somewhat fluid in April—came into sharper focus in early May. While the “de-stacking” of materials, parts, and vehicle levies were eased, the levels of those individual (and significant) tariffs were not. And the charges on imported parts affect literally every single vehicle sold in America, regardless of where it is ultimately produced.
While the costs are now better understood, the overall impact is just beginning to come into focus, and it is massive. General Motors warned Wall Street of a $5 billion hit to its profit forecast, and Ford is signaling that its tariff costs would be $2.5 billion. Multiple OEMs have pulled their financial guidance due to significant cost increases, and many are beginning to signal that price increases will have to be part of their strategy to absorb them. As an example, Ford announced that vehicles produced in Mexico after May 2 will be subject to price hikes, and other OEMs are expected to take similar actions to offset the costs they are now incurring.
While it is commendable that brands like Hyundai, Nissan, and Ford are taking a public stance to keep prices low, it is noted that many of these programs are temporary pauses until tariffs kick in on current production.
With all that being said, vehicle prices have not moved significantly higher after crossing the average $50,000 barrier in mid-April. But all signs point to that hiatus being short-lived, and the increases still to come being substantial. In other words, the tariffs have just begun to hit OEM bottom lines and consumer pocketbooks, but it is almost inevitable that the impact will grow as late Spring turns to Summer.
