The effects of President Trump’s 25% tariffs on autos and auto parts will likely disrupt supply chains and increase the cost of autos and auto parts. As consumers pivot from more expensive new vehicles, demand and cost for used cars, repairs, and auto parts is likely to increase as well.
The 25% tariff on foreign-made vehicles went into effect on April 3. The 25% tariff on auto parts should go into effect no later than May 3. Ryan Mandell, director of claims at Mitchell International, expects the industry to feel the effects later this summer and pointed out some aspects that might help mitigate some of the cost increases.
Two important factors are auto parts compliant with the United States-Mexico-Canada Agreement are not subject to the current tariff and sheet metal components appear to be excluded, Mandell said during a special CIECA webinar on Thursday, April 17.
“The USMCA remaining in place is a huge boost to our industry because it really does limit vehicle exposure to the tariffs,” Mandell said.
He added that, “GM, Ford, Toyota, Nissan, and Volkswagen all do a significant amount of manufacturing work, not only in the United States, but in Canada and Mexico as well. And so, in that regard, those goods will continue to move across those borders tariff-free, again with the caveat that the percentage of content not from North America will now be subject to a tariff."
Steel and raw materials are currently tariffed at 25%, but Mandell said that sheet metal components – including hoods, fenders, quarter panels, doors, and bumpers – don’t appear to fall under additional parts tariff categories at this time and shouldn't go up to 50%.
Wholesale vehicles and manufacturing
Complicating factors around the tariffs include vehicle manufacturing. If a car is manufactured inside the U.S., that doesn’t mean it might not be subject to more parts tariffs than a foreign car. Mandell cited National Highway Traffic Safety Administration data showing a significant amount of manufacturing takes place in Korea and Japan with varying levels of foreign-made parts.
For example, the “domestic” Chevy Trailblazer is assembled in Korea and has 52% of its parts from Korea, so the entire vehicle is subject to the 25% tariff. The Honda CR-V is assembled in the U.S. and only 20% of its parts come from Japan.
“The rest of that [Honda CR-V] content appears to be coming from North America and so that vehicle would actually be a USMCA-compliant vehicle, and only that 20% of content that’s coming from Japan would be tariffed,” Mandell said.
He added that just looking at a domestic or foreign-made car brand won’t tell you how exposed a car is to tariffs and it be specific to each vehicle model.
Mitchell expects the tariff on wholesale vehicles to increase interest in the used vehicle market. Mandell used the 2025 Hyundai Elantra to illustrate what happens if the full 25% is passed onto the consumer. The MSRP of the vehicle increased about $5,000 from $22,000 to $27,000. Mandell said that new auto sales are doing well as consumers look to get their purchases in before the tariffs start affecting prices, but manufacturers will lower production for cars going to the U.S. once it starts.
More expensive new cars, and less supply, could drive people to maintain their current vehicles for longer or look for a cheaper, used option. Mandell projects that used car prices will increase 5-10% over the course of the next year as demand increases, lower than the increases for new vehicles.
“The average age of vehicles increased during COVID. We expect the average age of the car parc will increase [here],” Mandell said. “There is a level of inventory on shore now, but overtime you’ll see the prices change.”
Mitchell projects that the increase in vehicle costs will lead to a small decrease in total loss declarations. Mandell projected a 1–3% decrease in total loss frequency based on actual cash values of vehicles and a wider repair threshold under standard 70% actual cash value metrics due to cost increases.
Using the same Hyundai Elantra example, Mandell showed that the 70% threshold increased by about $3,400. It’s a lower increase than the almost $5,000 MSRP increase and gives more relief for repair before it’s declared a total loss.
“That gives you a lot more room to fix that vehicle,” Mandell said. “Our prediction would be that over time, as we start to see more of these vehicles that have been subjected to the tariffs where the price does go up, that we would expect to see a reduction in overall total loss frequency.”
Repair Parts Supply and Demand
Inventory is a big question collision repair shops must deal with. Aftermarket parts are subject to the tariffs and some parts might be more exposed than others. Parts made from sheet metal seem to be the major area not increasing with the new tariff, Mandell said.
The three main categories that fall under the parts tariff include:
- Electrical such as headlamps, sensors, cameras, and tail lamps are more exposed due to the global nature of their supply chains.
- ADAS components use copper, ceramics, glass, and plastics from various sources and cross multiple borders before final assembly and distribution.
- Safety components such as air bags, seat belts, bumper reinforcements, windshields, and steering/suspension parts are all subject to the auto parts tariff.
“Windshields are a big one. We know a lot, especially on the aftermarket, come from mainland China,” Mandell said.
Parts coming from China is that the additional 245% tariff on imports from China does not apply to the auto tariffs. It is “only” the 25% tariff and any changes to other tariffs should not affect the auto tariffs.
“Because it is coming from an industry that is singled out, it is not subject to the reciprocal tariff,” Mandell said.
As repair frequency and parts demand increases, the salvage market will increase as recycled parts already in the country aren’t subject to the tariff. Mandell expects the cost of repair and repair times to increase, but not at the same level as new vehicle wholesale costs.
Tariff Mitigation Strategies
Mandell ended his presentation with three strategies that can help repair shops prepare for and mitigate tariff effects:
- Increase Supply Chain Transparency: Ask where your parts come from and if there are alternatives available domestically or in the USMCA.
- Repair more parts: Repairing old parts are not subject to tariffs.
- Use more recycled parts: Recycled parts are sourced and dismantled domestically, avoiding the tariffs.
Mandell’s full presentation is available on the CIECA Standards YouTube page here, or view below.
