Automobiles are shown for sale at a car lot in Oceanside, California, U.S.
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REUTERS/Mike Blake

Mary E. Lovely (PIIE), Jérémie Cohen-Setton (PIIE) and Euijin Jung (PIIE)

President Donald Trump’s proposal in May to impose 25 percent tariffs on imported automobiles, SUVs, vans, trucks—as well as all auto parts—will raise car prices significantly, suppressing sales and pushing some buyers with modest incomes out of the new car market entirely. Using industry data, consumer information, and the record of previous tariff hikes, the authors estimate that this action would raise car prices for buyers between $1,400 and $7,000 for the top selling models across three categories—compact cars, compact SUVs/crossovers, and luxury SUVs/crossovers—assuming that automakers would pass along the extra cost to consumers, either at 66 or 100 percent of the import tax.

Photo Credit: 
REUTERS/Mike Blake