Tariffs will lead to 2 million fewer auto sales in US this year, auto advisory firm forecasts

U.S. and Canada auto sales could decline by 1.8 million vehicles this year and be stagnant over the next decade if the global trade war escalates, a Detroit-area automotive advisory firm forecasts.

If the current tariffs stay in place until 2035, sales of light-duty vehicles in the U.S. and Canada would be about 7 million units lower than the 24.6 million sales in a scenario with no trade conflicts and strong economic growth, Telemetry said on Monday in a forecast provided exclusively to Reuters. President Donald Trump's 25% automotive import tariffs went into effect April 3. Vehicles made in Mexico and Canada face the levy, but automakers compliant with the terms of the U.S.-Mexico-Canada Agreement can deduct the value of U.S. content. The Trump administration has also imposed reciprocal tariffs of varying rates on different countries, which were not applied to Canada and Mexico.

The tariffs have pressured automakers to make production changes with General Motors increasing truck output at an Indiana plant and Stellantis, maker of Ram trucks and Jeeps, temporarily shutting down production at two plants in Mexico and in Canada, affecting five U.S. facilities that are connected to them.

Automakers including Ford Motor and Stellantis upped their incentive offers to ease consumers' concerns about the duties adding to vehicle prices. Analysts have projected that sustained tariffs will increase prices by thousands of dollars, and automakers have warned the same.

"Vehicle affordability is already a major issue for consumers," said Sam Abuelsamid, vice president of insights at Telemetry.

On average, new vehicles cost nearly $50,000 and interest rates on vehicle loans have increased since the pandemic.

"With sales going down, you're going to have layoffs," Abuelsamid said. "And even to the degree that some production shifts to the U.S., it's not going to be enough to offset the lost employment from higher costs and lower sales."

Although the rate of EV sales growth has slowed in recent years, Telemetry expects battery electric vehicles to be the most common powertrain across the globe in a decade, with 40.5 million vehicles sold.

The firm expects BEV volumes in Canada and the U.S. to reach 8.8 million units in a scenario with no trade conflicts and strong economic growth, especially as options such as extended range EVs become more prevalent.