Trump's Tariff Plan to Hit Affordable Cars the Hardest

U.S. car industry has a 'big case of anxiety' about president-elect's proposed 25% tariff on Mexico, Canada imports

- Sean McLain

Finding an affordable car in the U.S. has already become a challenge for many budget-constrained Americans. New import tariffs on Mexican-built vehicles threaten to make the problem worse.

Today, nearly one-third of all vehicles priced below $30,000 and sold in the U.S. are built in Mexico, including the Nissan Sentra, Ford Maverick, and other popular nameplates, according to an analysis by car-shopping website Edmunds. A decade ago, Mexico was responsible for one-fifth of the affordable cars sold in the U.S., the firm's data shows.

The border country has long been a go-to for automakers looking to defray the hefty expense of manufacturing a car, particularly on smaller models that sell for lower price points and have slimmer profit margins than larger trucks and SUVs.

President-elect Donald Trump has threatened to upend this strategy, pledging in November to impose 25% tariffs from Mexico and Canada, a move that could mean undoing the free-trade agreement he negotiated in his first term.

Any new tariff-related costs are likely to be passed along to the consumer—at least in the near term—and would hit the most affordable cars and SUVs the hardest, analysts and dealers say.

Some lower-price models, such as the Honda Civic sedan, are made in Canada, and car parts built in the two neighboring countries would additionally be subject to new trade duties, further pushing up costs for manufacturers and consumers.

Trump's tariff proposal could add about $3,000 to the average cost of every car sold in the U.S., according to a Wolfe Research estimate.

"Everyone's got a pretty big case of anxiety here," said Steven Center, head of Kia's U.S. operations. "In two words: Please don't. Punch me in the arm. Smack me in the head. But please don't put a tariff on."