The U.S. auto market is feeling the pressure as rising tariffs, high prices, and economic uncertainty take their toll on carmakers, dealers, and buyers. After a brief boost in sales during the spring, the market hit a wall in June as consumers hesitated to make big purchases. This slowdown follows President Donald Trump’s implementation of new tariffs on auto imports, which has forced manufacturers to rethink their pricing strategies and brace for more challenges ahead.
In June, the annualized rate of car sales dropped to 15 million, a significant decline from 17.6 million in April. This marks the slowest sales pace in the past year. Despite a modest 2.5% increase in sales compared to the previous year, analysts warn that the initial rush to buy vehicles before the tariffs took effect has faded. Jonathan Smoke, chief economist at Cox Automotive, noted that the “party is over,” highlighting how worsening affordability is likely to lead to production declines as companies try to keep supply in balance.
At the dealership level, the impact is already evident. Sales have cooled off after the earlier rush, with Peter Petito, a Honda dealership manager in Queens, likening the situation to people scrambling for essentials before a storm. Economic anxiety has now surpassed high interest rates as the main reason consumers are holding back on purchases.
The average cost of a new car reached $48,799 in June, up just 1% from a year ago, but 28% higher than in 2019. Many buyers are now stretching car loans to seven years, reflecting the growing affordability issues. Charlie Chesbrough, a senior economist at Cox, warned that prices are likely to rise more rapidly due to the tariffs, with predictions that the cost of vehicles could increase by nearly $2,000 each.
Trump’s tariffs, which impose a 25% duty on imported vehicles and parts, have ended previous exemptions and apply broadly, including to imports from Canada and Mexico. While U.S.-made vehicles can qualify for partial rebates, the overall impact of the tariffs has raised concerns about supply chain disruptions and consumer affordability.
As the auto industry braces for a challenging second half of the year, analysts predict that the monthly sales rate will hover around 15 million, down from 16.3 million in the first half of 2025. The fears of higher prices and ongoing economic uncertainty are likely to keep consumers cautious about making major purchases.