Baris Akyurek is the vice-president of insights and intelligence at AutoTrader.
Tariffs may be designed with trade or industrial policy in mind, but their market impact rarely stops at the factory gate. In automotive, they set off a chain reaction: higher new car production costs, consumer behavioural shifts, changes in supply dynamics and ripple effects in the used market.
Now that it has been a little more than a year since U.S. President Donald Trump took office and has been remaking global trade, we wanted to look back to see how the tariffs are affecting the car market and prices. Afterall, the auto industry, steel and aluminum are some of the key sectors caught in the crosshairs.
When tariffs dominated automotive headlines last year, the focus was on new vehicles: where they are built, how much more they would cost and which manufacturers were most exposed. However, as with most shocks to the new vehicle market, the longer lasting effects are felt in the used market.
Looking at the average prices for December 2025, used car prices ended the year with an increase of 2 per cent, at $35,201, and new car prices were down 2.7 per cent, at $63,439, compared to December 2024. We estimate that, assuming all else being equal, for example, if the tariffs hadn’t happened, on average, used car prices would have been closer to $34,371.
This implies tariffs raised used car prices by about $830. Without tariffs, used car prices would have declined relative to December 2024, rather than increasing.
A demand shift driven by affordability
Tariffs effectively function as a tax on new vehicles. Whether costs are absorbed by manufacturers, suppliers, dealers or consumers, they raise uncertainty and, over time, prices.
New vehicle prices declining in 2025 was because inventory levels have been healthy, some manufacturers decided to absorb the increase in tariff-born costs and tariff exemptions, thanks to CUSMA. But the real impact is buried in the supply and demand imbalances that exist within each manufacturer.
In an already affordability-constrained environment – (explored in my lastpiece), shaped by higher interest rates, elevated prices and stretched budgets, even the expectation of higher new vehicle costs changed shopper behaviour.
This is a classic substitution effect. As new vehicle pricing became less predictable, a growing share of consumers shifted toward used vehicles, a similar thing happened during the pandemic. This is not limited to bargain hunters, some of whom exited the market altogether. AutoTrader’s transactional used vehicle data indicates that, in 2025, consumers in lower-income segments purchased fewer cars while the overall market grew year-over-year.
Meanwhile, many middle-income buyers who might otherwise have stretched into new vehicles opted for used, where pricing felt more stable and inventory more tangible. AutoTrader’s vehicle purchase intention survey showed the highest intention of switching from new to used during the height of the tariff discussions in 2025. This shift has been evident in rising used vehicle demand and transaction activity well before tariffs, extending into the end of summer. The used market reacted not just to tariffs, but to expectations about what tariffs would do.
Pull-forward behaviour heats the market
Another dynamic at play is timing. When consumers believe prices are likely to rise, some do not wait, they pull purchases forward. This was clear in the weeks surrounding major tariff announcements, with used vehicle demand accelerating even before any direct price impact was expected, including ahead of the so-called ‘Liberation Day’ on April 2.
Typically, used car prices start the year higher and decline as it progresses. But given tariff expectations, used prices began to increase in March.
This kind of pull-forward behaviour does not necessarily increase total demand, but shifts consumers across segments (new versus used, luxury versus mainstream) and compresses demand into a shorter window. The immediate effect is a hotter used market: cars that spend fewer days for sale on a lot, firmer pricing and fewer incentives for sellers to negotiate.
Supply constraints amplify the effect
Used vehicle pricing is a function of supply and demand. On the supply side, tariffs matter indirectly but meaningfully. Any policy that disrupts or slows new vehicle production and availability, through higher costs, parts shortages or manufacturer pullbacks, reduces the flow of vehicles into the used market. That matters because used supply is largely predetermined. Today’s inventory comes from yesterday’s new sales. If new sales soften or production is constrained, the ripple effects show up later in tighter availability.
Layered onto an already lean used supply environment, with our estimate that 1.5 million fewer new vehicles were sold between 2020 and 2023 because of pandemic-era disruptions, this helps explain why used vehicle prices have proven resilient even as broader inflation cooled.
If there is one silver lining, it is the impact of reciprocal Canadian tariffs, which slowed exports of used vehicles to the U.S. This is particularly important as the weaker Canadian dollar has historically led to more used vehicles moving south.
Not all vehicles are affected equally
One of the most important points, often lost in the tariff debate, is that the impact is highly uneven. Impact depends on where a specific vehicle is built, how its supply chain is structured and how easily production can be shifted.
For consumers, this means both the new and used markets are increasingly fragmented. Broad generalizations matter for understanding direction, but model by model realities matter more, especially for buyers and sellers actively in the market.
It was a seller’s market with one notable exception
Taken together, these forces point to a used vehicle market that largely favoured sellers, especially in the first half of last year. Inventory remained tight, demand was supported by new vehicle affordability and availability pressures and prices held up better than anticipated.
There are, however, exceptions, most notably in battery electric vehicles (BEV). BEVs face their own challenges: incentive volatility, policy uncertainty and shifting consumer sentiment. As a result, used BEV prices have softened in some cases to levels that are more attractive for buyers. By contrast, certain segments, namely hybrids, remain in high demand, with more rigid pricing.
This divergence underscores a broader point: that new and used markets no longer move as a single block. They are increasingly segmented, shaped by make and model availability, tariffs, shifting demand across segments, volatile economic sentiment, geopolitics and policy, as much as by traditional supply and demand.
The divergence across North American auto markets appears set to continue into 2026, with uncertainty lingering and the upcoming CUSMA review in July likely to shape what comes next.