U.S. auto dealers are preparing for what will likely be a turbulent few months, as the first effects of newly imposed tariffs on imported vehicles and auto parts begin to ripple through the industry. According to a fresh analysis from J.D. Power, the full picture of the tariff fallout is still coming into focus – but one thing is clear: The impact won’t be uniform.

“Asymmetry makes it almost impossible for highly tariffed brands and models to increase prices without large volume declines,” says Thomas King, president of data and analytics and chief product officer at J.D. Power. “In order to maintain reasonable volumes, a large portion of tariffs must be absorbed.”

$62 Billion in Tariff Exposure – But It’s Complicated

Today’s tariff landscape includes a 25% tax on imported vehicles and major parts, with even Canadian and Mexican-made vehicles facing charges if they contain less U.S. parts content than is required under the U.S.-Mexico-Canada Agreement trade pact. The average vehicle tariff exposure is approximately $4,782, but this number varies significantly across manufacturers.

For dealers, this means some brands will be hit much harder than others. King says that highly imported lineups may see thinner margins or even product cuts, while brands with stronger U.S. production footprints could be in a better position to compete on price.

Inventory Strategy: Short-Term Wins, Long-Term Shifts

As reported earlier by WardsAuto, new-vehicle sales in Q1 2025 were especially strong because consumers took advantage of pre-tariff pricing. That urgency continues into Q2, but J.D. Power warns this is temporary. Starting as soon as May or June, King expects price increases to begin as tariff-affected vehicles arrive on dealer lots.

Manufacturers face tough decisions: Should they maintain low-margin, high-tariff models in their U.S. lineups or reallocate them to other markets? Many may also fast-track efforts to localize production or revise parts sourcing strategies to reduce exposure.

Pricing, Profitability and Customer Demand

J.D. Power projects an average new-vehicle price increase of 5% – or about $2,300 – by year-end, with retail sales dropping 8%, or roughly 1.1 million vehicles. Depending on how brands respond, the pricing effect could range between 3% and 5% in Q3. J.D. Power notes forecasts rely heavily on broader economic health, such as interest rates.

“Due to the competitive nature of the market, coupled with tariff asymmetry, it will be challenging for highly tariffed brands to simply pass on those price increases to buyers while still maintaining profitability,” a report authored by King and other analysts notes.
By Q4, J.D. Power expects the market to stabilize into a “new normal,” with pricing, supply, and production adjustments starting to take hold. In the meantime, dealers should focus on staying informed, managing inventory proactivel,y and helping customers navigate a market that’s anything but business as usual.

What Dealers Can Do Now

• Communicate early and clearly with customers about any changes to inventory and pricing.
• Highlight U.S.-built models that tariffs may have less impact on.
• Collaborate with manufacturers to understand upcoming allocation strategies and product lineup changes.
• Train staff to explain why pricing may vary more sharply across similar models or brands.