At least some of those higher costs will likely be passed on to consumers, he said, since automakers are already operating on relatively thin margins. Car prices are at record highs, having increased 34% since 2019 to an average selling price of nearly $50,000. Used car prices could also increase if the supply of old cars goes down because higher prices encourage more Americans to put off upgrading their vehicle. 

Vehicles and their parts have been freely flowing between Canada, the U.S. and Mexico for decades as the automotive supply chain has become deeply interwoven. Cars made in the U.S. contain parts from Canada and Mexico, while U.S. parts are used in cars assembled across the border and later shipped back for sale to American consumers. 

“Parts travel back and forth very freely, and that’s just part of the assembly process of a vehicle,” said Sam Fiorani, an auto industry analyst at AutoForecast Solutions. “A supplier in Ontario may provide parts to a factory in Michigan or Ohio and vice versa. It’s how the business plan has developed over the last half century or more.”

Commerce Secretary Howard Lutnick disputed the notion that the tariffs would lead to higher prices for consumers in an interview Tuesday on CNBC.

“Tariffs do not, do not cause inflation,” Lutnick said. “One product can be more expensive and one product could be less expensive. China has the highest tariffs in the world. everything gets taxed in China, and they don’t have inflation. In fact, they have deflation. India has the second highest tariffs in the world, they don’t have inflation. So this concept is just people whining and complaining and not being truthful. The fact is, we need to protect America.”

Trump said he is putting the tariffs in place, in part, to pressure the countries into stopping undocumented immigrants and fentanyl from entering the U.S. via their borders. More than 107,000 people died from drug overdoses in 2023, according to the Drug Enforcement Administration, with nearly 70% of those deaths from opioids, including fentanyl. Nearly all of the 21,900 pounds of fentanyl seized in 2024 was at the southern border, with just 43 pounds of fentanyl seized at the northern border, according to data from Customs and Border Protection.

But Trump has also said tariffs will encourage companies to move production from Canada and Mexico to the U.S. In a post on social media Tuesday, Trump wrote, “IF COMPANIES MOVE TO THE UNITED STATES, THERE ARE NO TARIFFS!!!”

Moving more vehicle production to the U.S. could take years and come with higher costs for labor, materials, and healthcare — all factors that could also contribute to higher prices for car buyers. 

“One of the reasons that a lot of them have sought to move production to Mexico is because labor costs are a lot cheaper, materials cost is cheaper, environmental costs are not as high, healthcare costs are an issue, as well,” said Aaron Bragman, Detroit bureau chief for Cars.com. “It’s not a cheap thing for these automakers to do and at the end of the day it goes back to the consumer, all that cost gets passed on.”

For automakers, higher costs from the tariffs could ultimately lead to higher prices that could cause consumers to put off purchases. That would, in turn, lead to a drop in the production of new cars and ultimately a reduction in jobs, Bragman said. 

“If people stop buying cars because they’re too expensive, or they start delaying these purchases as they’re getting too expensive that means cuts in production, that means they don’t need as many people working in plants,” said Bragman. “And that has a knock-on effect. If you start to see plants not employing people, the local communities start to be impacted as well.”

The United Auto Workers, which has long opposed free-trade deals with Canada and Mexico said in a statement Tuesday that it supported Trump’s latest action on tariffs, which it called a “powerful tool in the toolbox for undoing the injustice of anti-worker trade deals.” (The union previously criticized Trump’s tariff plans earlier in his administration.)

“We are glad to see an American president take aggressive action on ending the free trade disaster that has dropped like a bomb on the working class,” the statement said. “There’s been a lot of talk of these tariffs ‘disrupting’ the economy. But if corporate America chooses to price-gouge the American consumer or attack the American worker because they don’t want to pay their fair share, corporate America bears the blame for that decision.”

Still, automakers have been warning that the tariffs could ultimately cripple their supply chains. Ford CEO Jim Farley warned last month that the threat of the tariffs was creating chaos in the auto industry and could have devastating consequences for American automakers. 

“Let’s be real honest, long-term, a 25% tariff across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen,” Farley said at an investor conference last month.

In Livonia, Michigan, AlphaUSA, which makes more than 200 million automotive parts a year for U.S. automakers, is bracing for higher costs as the tariffs ripple throughout its supply chain. 

While the company’s parts are made in Michigan, some components to those parts, like the steel or wires, come from Canada. The company also ships to assembly plants in Canada and Mexico and buys some of its tools from Canada. It has already been notified by some suppliers that their prices will be going up as a result of the tariffs.

“I can’t imagine the tsunami that they’re going to be under with these costs,” said AlphaUSA president Chuck Dardas. “It’s going to come to us, then we’re going to have to deal with it. These suppliers that we have, unfortunately, if we don’t do as they ask, they will stop shipping us, and the last thing we’re going to do is let our customers down.”

High prices for auto parts and vehicles could also increase the cost of auto insurance if insurers have to pay more for repair parts and replacement vehicles, according to an analysis by S&P Global. Progressive CEO Tricia Griffith said on a conference call Tuesday that the insurer was closely following how the tariffs will impact prices and preparing to make adjustments for higher costs.