New Car Tariff Threat Could Have Little Effect on Car Prices

Sean Tucker 05/05/2026 12:35pm

President Trump has threatened a 25% tariff on European cars and trucks over concerns the European Union is moving too slowly on a trade deal signed last year.
The move could mean little for car shoppers – hefty tariffs enacted last year have not led to a corresponding increase in new car prices.

President Trump threatened Friday to increase tariffs on cars and trucks imported from the European Union to 25% from a previously agreed-upon 15%, but the threat may have little impact on car shoppers.

Tariff threats and the negotiations they triggered dominated auto industry headlines in 2025. But they had less impact on sticker prices than public attention suggested.

Trump initially enacted 25% levies on most cars and car parts from outside the U.S..

Later negotiations set tariffs on most cars imported from Europe, Japan, and South Korea at 15%. Yet the average new car in March sold for just 3.5% more than a year ago, before tariff discussions began.

As of press time, the White House has made no formal move to back up the threat.

Threat Will Feed Negotiations

The move may be a negotiating tactic, as the EU is still debating how it will act on the trade deal.

In a social media post, Trump said he would impose a 25% levy because “the European Union is not complying with our fully agreed to Trade Deal.” He told reporters the move would mean “billions of dollars coming into the United States, and it forces them to move their factory production much faster.”

Politico explains, “Under the terms of the agreement struck last July, U.S. tariffs on European cars were set at 15 percent. In exchange, Brussels agreed to lower industrial tariffs, purchase $750 billion in U.S. energy and invest $600 billion in the American economy.”

That could include producing more cars in the U.S. But the automotive industry rarely moves quickly. Automakers plan new factories many years in advance. Even designing a single new car can be a 5-year process. Opening new factories less than a year after an agreement would have required unprecedented speed.

Reuters reports that European governments have begun internal negotiations on how to respond, “with the EU assembly wanting to establish multiple safeguards.”

Those could “include a sunrise clause to make EU import duty reductions conditional on Washington ⁠honouring its side of the bargain, a sunset clause under which the tariff concessions expire on March 31, 2028, and a clause to suspend the deal if Washington breaches the terms of the deal or if there is a damaging surge of U.S. imports.”

Tariff Policy Still Volatile, but Not Affecting Sticker Prices Much

Changing tariff policy is impacting automakers’ bottom lines, but not moving sticker prices much.

U.S. courts, meanwhile, have ruled that Trump exceeded his authority in enacting some tariffs.

Ford, General Motors, and Stellantis “say the U.S. government owes them more than $2 billion in refunds on President Donald Trump’s import tariffs — money that’s bolstering their financial outlooks for 2026 and helping offset rising commodity costs tied to the Iran war,” reports industry publication Automotive News.

Amid so much uncertainty, new car prices remain historically high, but have not risen to match tariffs. Instead, consumer choice is playing the largest role in the climbing sticker price of the average new car.

Of the five best-selling segments of the market, none saw prices rise more than 3% year over year in March: