Market News

Nora Eckert

By Nora Eckert

DETROIT (Reuters) - After Matthew Mitchell heard U.S. President Donald Trump was serious about implementing 25% tariffs on Mexico and Canada, he told his wife it was time to snatch up a car, and fast.

“I was like 'Ok, we’re going this weekend,'" Mitchell said. He raced to a dealership in Walnut Creek, California to land a deal on a 2019 Toyota Camry in early March to avoid any tariff-related price hikes.

Mitchell is part of a group of buyers who say they expedited their car shopping out of concern that Trump's tariff threats would result in showroom sticker shock.

Right now, the levies are not affecting dealer lots, which on average have a three-month supply of vehicles. Many U.S. automakers have already gotten two reprieves on tariffs since Trump said they would take effect in early February.

But the uncertainty spurred people to react.

Between February 16 and 22, searches on car-shopping website Cars.com jumped 9% from the previous week, said David Greene, a Cars.com analyst.

"When the announcement of the tariffs first occurred in early February, it didn't register with car shoppers right away. But when the conversation turned to tariffs on all imports and the new auto tariffs were pushed to April, searches on Cars.com really started to climb," Greene said.

Last week, a Reuters poll of 74 economists showed risks to the Mexican, Canadian and American economies are piling up due to the unpredictability of U.S. tariffs, with rising expectations for both a recession and more inflation. Those concerns have caused consumers to grow more cautious.

Across the border in Calgary, Canada, Darby Madalena dashed off to a nearby dealer to buy a 2025 Subaru Forester about a year ahead of her original plan. “It didn’t make sense to wait anymore,” said Madalena.

Philip Hodge also finalized his purchase for a new Mustang Mach-E electric vehicle, knowing the Ford model was imported from Mexico into the U.S. "I was like, let's just get it done now and not worry about it," he said.

Car dealers say they have enough vehicles in inventory to weather weeks or months of instability. Dealers had an average of 96 days of supply on their lots in February, according to Cox Automotive, a 26% increase from the start of the year.

Some dealers say the short-term uncertainty is a boon as more customers may wander into the showroom.

“People start hearing that tariffs are coming, they'll probably want to come and buy my cars out of stock,” said Dearborn, Michigan Ford dealer Jim Seavitt. He said sales were very strong the week of March 3, but he credits that more to deals he was running, not tariff worries.

Even so, some dealer web pages used the threat of levies as a sales tactic. One Subaru dealership in Connecticut blasted a banner on top of its website: "Final clearance pricing on remaining 2024s - save now before tariffs drive prices up."

Cars have become less affordable since the pandemic, as the average vehicle sales price reached $48,641 in January, according to Cox Automotive, a 30% increase from the average $37,348 price in January 2019.

Some buyers pushed up their purchases last year after Trump was elected, expecting that he would make good on the tariff changes he floated on the campaign trail.

"In early November, we thought 'we should probably get serious about this,'" said Saud Ansari, who lives in the Cleveland, Ohio, area. He finalized the purchase of his 2025 Toyota Sienna from a dealer near Columbus, Ohio, shortly before the inauguration.

Trump delayed the original duties until March, and then added another one-month reprieve for all vehicles compliant with the United States-Mexico-Canada Agreement (USMCA) rules of origin. But for Ansari, the threat of tariffs and concerns about higher interest rates was enough of a motivation.

"I'm glad to have it out of the way for a few reasons. Number one is the uncertainty ahead," he said.

(Reporting by Nora Eckert; Editing by David Gregorio)