How tariffs and trade policies actually affect car prices
A shopper walks into a Detroit dealership in early 2025. The Subaru Outback she wanted last month? It’s just jumped $5,000 overnight.
Cut to Sunderland, where a Nissan worker watches production lines slow. Then to Rotterdam, where a Chinese EV sits on the dock with a 45% tariff bill attached.
These aren’t isolated incidents. They’re all connected by the invisible strings of global trade policy.
Welcome to 2024/25: the year tariffs stopped being boring economic theory and became very real price tags on your next car.
The UK’s Brexit hangover gets worse
The UK spent years kicking the can down the road, but January 2024 brought a proper crisis.
The rules of origin cliff-edge
Under the Brexit trade deal, EVs traded between the UK and EU needed to hit a target of 45% local content by January 2024. Miss that target? Boom – 10% tariffs.
The problem? Nobody could meet it.
China dominates 70% of global lithium-ion battery manufacturing. European battery production was meant to be ramped up by now, but COVID, the Ukraine war, and global supply chain chaos had other plans.
The cost if those tariffs kicked in? A cool €4.3 billion across the industry. That’s 480,000 fewer EVs produced. Jobs lost. Plants threatened.
The last-minute reprieve
In December 2023, the UK and EU agreed to extend the current rules until the end of 2026.
Crisis averted – for now.
But here’s the kicker: by 2027, the full rules kick in.
EVs will require 55% UK/EU content, and battery packs will need 65-70% local content. Meaning the industry’s got a mere two years to build an entire battery supply chain from scratch.
Ouch.
The damage Is already done
Even without the tariffs, Brexit’s been brutal.
UK car exports to the EU fell 9.6% in 2024 despite a 17% rise in global production.
Think about that – more cars are being made, but selling fewer to the closest market.
The paperwork alone costs €300 million annually. German automakers grabbed 14% more EU market share in 2023 – tariff-free, naturally.
BMW closed its Oxford MINI plant in 2024. Nissan’s shifting production to the Czech Republic.
British cars now need a passport to visit their European cousins.
America’s tariff chaos
If Brexit’s been a slow-motion car crash, Trump’s March 2025 tariff announcement was a high-speed collision.
The big one
On March 26, 2025, President Trump dropped the hammer: 25% tariffs on all imported vehicles and parts.
Not some. All.
This wasn’t on top of nothing – it was added to the existing 2.5% import tariff. For light trucks, it stacked onto the 25% “chicken tax” that’s been around since the 1960s.
The automotive industry collectively lost its mind.
The damage (with actual numbers)
Cox Automotive estimated the tariffs would cost the industry $25 billion in just seven months.
The average imported vehicle? Charged $5,200 at the border.
Company-by-company breakdown:
- Toyota: $9.5 billion hit
- GM: $4-5 billion
- Ford: $3 billion
Ford’s CEO called it a tariff policy that “would blow a hole in the US industry that we’ve never seen.”
Consumer prices? Analysts predicted increases of $4,000-$15,000 per vehicle, depending on how much was imported.
The backtracking begins
Then things got weird.
After one day – literally one day – Trump announced a 30-day pause.
Then came the deals:
- Japan: Negotiated down to 15% (still 500% higher than the historical 2.5%)
- UK: 10% on the first 100,000 cars (with a cap)
- USMCA countries: Partial exemptions for compliant content
The Subaru Outback? Now $34,995 – up $5,000 for the 2026 model year.
The irony nobody’s talking about
Here’s where it gets darkly funny. The tariffs were meant to bring manufacturing back to America.
So what happened? Domestic manufacturers announced massive investments:
- Stellantis: $13 billion
- GM: $4 billion
- Ford: $2 billion
Great news, right?
Except they also slashed profit expectations. Prices still went up 4-8% for consumers. And the UAW – the union representing auto workers – actually cheered the tariffs.
Jobs over prices, they said. Which is easy to say when you’re not the one buying the car.
The EU vs. China EV showdown
While the US and UK wrestled with their own drama, the EU had a different problem: Chinese electric vehicles flooding the market at prices European makers couldn’t match.
October 2024: The EU strikes back
The European Commission wrapped up an investigation and imposed tariffs ranging from 17% to 35.3% on Chinese EVs (on top of the existing 10% import duty).
Total tariff: Up to 45.3%.
The justification? China was allegedly subsidizing its EV industry to an unfair degree. Public money was “detected across the entire supply chain,” from mines to shipping.
The goal was simple: slow down Chinese imports and protect European manufacturers.
Plot twist: It didn’t work
China’s EV market share in the EU did fall – from 55% in early 2024 to 42% by mid-2025.
Mission accomplished? Not quite.
Because the same thing happened in Norway, Switzerland, and the UK – none of which imposed tariffs. China’s share fell everywhere by roughly the same amount.
Turns out, Chinese EV export growth had already peaked in 2021-22 and was naturally slowing.
The loophole nobody saw coming
Here’s where Chinese manufacturers got clever. The EU’s tariffs only applied to battery electric vehicles (BEVs).
Plug-in hybrids? No tariffs.
So what did Chinese brands do? They pivoted to PHEVs. In January-February 2025, PHEV imports from China jumped 892% to 25,900 units.
Meanwhile, BYD’s total sales (including PHEVs) grew 207% year-over-year in October 2025. Chinese plugin vehicles overall grew 93% in Europe.
The tariffs were meant to protect European manufacturers. Instead, they just changed which type of Chinese vehicle Europeans were buying.
The long game
Chinese brands aren’t stupid. They’re now building factories inside Europe to avoid tariffs entirely:
- BYD’s Hungary factory: Trial production starts early 2026
- Spain: Ebro-EV Motors and China’s Chery already producing
- Talks ongoing in Italy, Poland, and elsewhere
Once they’re building inside the EU, no tariffs apply.
The minimum price dance
As of early 2026, the EU and China are now discussing “minimum prices” instead of tariffs. Chinese brands would commit to not selling below a certain price in Europe.
The difference? Chinese manufacturers keep the extra profit instead of sending it to Brussels as tariff revenue.
Consumer prices won’t change much. But at least it ends the trade war posturing.
Japan’s painful adjustment
While the UK, US, and EU grabbed headlines, Japan quietly took one of the biggest hits.
The escalation
For decades, Japanese cars entered the US at a 2.5% tariff. Predictable. Stable.
Then April 2025 hit: 27.5% tariffs overnight.
That’s a 1,000% increase.
By September 2025, Japan negotiated it down to 15%. A “victory” – except 15% is still 500% higher than the historical rate.
The cost of that “victory”? A $550 billion investment commitment from Japan to boost US manufacturing.
The casualties
The damage was immediate and brutal:
- Nissan and Mazda: Net losses in Q2 2025
- Honda profits: Cut in half
- Toyota and Subaru: Down 30%+
The strategy: wait and pray
Japanese manufacturers are now pivoting to increase US production rather than exports. Sounds simple, right?
The problem? It takes 18-24 months to retool supply chains. Meanwhile, they’re stuck absorbing costs and hoping consumers don’t revolt.
Some are raising prices incrementally. Others are gambling that they can outlast the tariffs by eating the costs short-term.
It’s a painful game of chicken with no clear winner.
What it all means for you
Let’s cut through the noise and talk about what actually matters for the consumer.
The three uncomfortable truths
1. Prices are going up – permanently
The average new car in the US now costs $50,000, while in the UK, prices have risen 15-20% since Brexit.
Tariffs are adding another 4-8% on top. And these aren’t temporary. Like the China tariffs from Trump’s first term (which Biden kept), these are the new normal.
2. The affordable car is dying
Sub-$20,000 new cars in the US? Nearly extinct. Entry-level models are getting axed because manufacturers can’t make money on them anymore with tariff costs.
Budget buyers are being pushed to used cars – which are also more expensive due to tight inventory.
3. This is just the beginning
Every country is now playing the tariff game.
The UK might impose its own tariffs to “level the playing field.” The EU’s renegotiating with everyone. Japan’s scrambling to build more domestic capacity.
The era of seamless global automotive supply chains is over. What comes next is messier, more expensive, and more localised.
Who wins?
- Governments: Tariff revenue funds other programs (or tax cuts)
- Domestic manufacturers: Maybe, eventually, if they can actually compete once supply chains adjust
- Used car sellers: Tight inventory plus high new car prices equals a seller’s market
Who Loses?
- Consumers: Higher prices, fewer choices, longer wait times
- Global efficiency: Decades of supply chain optimisation getting undone
- Climate goals: EVs getting more expensive just when we need them cheaper
The road ahead
So what’s next?
More deals, more compromises
Expect a steady drip of trade agreements. More “15% victories” that are actually defeats. More caps, quotas, and carve-outs.
The UK will negotiate. The EU will keep talking to China. Japan will keep investing in US factories.
It’ll be messy, slow, and unsatisfying.
The gradual acceptance
Here’s the real prediction: we’re all just going to get used to it.
Cars cost more now. That’s life. The outrage will fade. The sticker shock will normalize.
Average transaction prices will keep climbing. Financing terms will stretch longer. And everyone will just…adjust.
The silver lining?
If there is one, it’s this: the chaos might eventually force real innovation.
When you can’t rely on cheap overseas parts, you have to figure out how to make things more efficiently at home.
When tariffs make EVs expensive, maybe battery technology finally gets the R&D boost it needs.
Or maybe not. Maybe we just pay more for the same stuff.
The final word
Tariffs were sold as protecting domestic industry.
The reality? They’re a tax on consumers dressed up as economic patriotism.
Wherever in the world you are, the message is clear: global trade just got a lot more expensive.
And your next car purchase is going to prove it.