25% Import Tariff Could Cut U.S. Car Sales by 2 Million Units

If President Donald Trump follows through with his threat to impose a 25% tax on all imported cars, the U.S. car market could lose 2 million sales annually, LMC Automotive predicts.

Jeff Schuster, LMC’s president of the Americas and global forecasting, tells Bloomberg News the hit to annual sales would drop to 1 million units if carmakers opt to absorb half the cost of the tariffs rather than pass them along to buyers.

Domestic carmakers, who have enjoyed a seven-year run of booming sales, aren’t asking for protection. But last month Trump ordered the U.S. Dept. of Commerce to assess whether the levy can be justified on national security grounds. He used the same argument earlier this month to rationalize import tariffs of 25% on steel and 10% on aluminum.

In both cases, Trump aims to use the levies to pressure other countries to lower their own import taxes on cars and other goods.

Schuster says higher prices caused by an import tax on cars could prompt consumers to postpone their purchase, turn to the used-car market or buy a U.S.-built vehicle—perhaps one made locally by a foreign brand.

About 36% of all passenger vehicles sold in the U.S. today are imported, according to Autodata Corp. Foreign carmakers locally assemble more than 60% of the cars they sell in the U.S.