Import Tariffs and the Market for Vehicles

Joshua Linn and Beia Spiller
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Joshua Linn: Resources for the Future
Beia Spiller: Resources for the Future

No 25-10, RFF Reports from Resources for the Future

Abstract: Vehicle import tariffs can have measurable impacts on the market for vehicles. Depending on how they are structured, tariffs increase the cost of importing vehicles and vehicle parts, affecting how manufacturers price their vehicles across their entire fleet. Price changes affect consumer choices, but the extent depends on consumer price sensitivity and the substitutability of tariff-affected vehicles and other options. In 2025, the Trump administration levied 25 percent tariffs on vehicles and vehicle parts imported from outside North America. In this report, we leverage a structural econometric model of the vehicle market to quantify the impact of these tariffs on outcomes including vehicle prices, demand, domestic manufacturing, tariff revenues, manufacturer profits, and consumer well-being. These tariffs distort the market, increasing vehicle prices and reducing demand for new vehicles. Moreover, the tariffs would reduce manufacturer profits, though depending on the structure of the tariffs, US-based manufacturers may profit to some extent. However, the costs to consumers far exceed the benefits to domestic manufacturers and the revenues collected by the government.

Date: 2025-05-02
New Economics Papers: this item is included in nep-iaf and nep-tre
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