Direct Hit to Used Car Market from Trump Tariffs
Inventory Lowest Since Pandemic Year 2021
New Car Supply Drops and Prices Rise... Used Car Shortage Worsens
"Supply Constraints Especially Severe for Used Cars in Good Condition"
The tariff policies initiated by U.S. President Donald Trump are resulting in a shortage of used car inventory and rising prices in the American used car market.
The Wall Street Journal (WSJ) reported on the 26th (local time), citing data from automotive market research firm Cox Automotive, that "as of early May, used car inventory held by auto dealers was at 43 days’ supply, the lowest for early May since the pandemic year of 2021."
Typically, used car inventory increases after mid-April, but due to recent supply chain disruptions, inventory levels have dropped to their lowest since 2021, when used car prices soared.
According to the report, the shortage of inventory has caused used car prices to rise, making it more difficult for consumers to find used cars that meet their preferences. Based on the 50 best-selling models in the U.S., the average used car price has continued to rise over the past two months, approaching $29,000, according to Cox Automotive data.
Although auto tariffs are not directly reflected in used car prices, rising new car prices and changes in consumer demand have also affected the used car market.
Previously, the Trump administration imposed a 25% tariff on foreign-made automobiles effective April 3. Starting on the 3rd of this month, a 25% tariff was also imposed on auto parts, including engines. However, reflecting industry opposition, the administration has eased some of the parts-related tariff measures by exempting, for one year until April 30 next year, parts equivalent to 15% of the price of cars assembled in the U.S.
Ford has already raised prices on three models produced in Mexico. Subaru has also announced price increases for some new models. Citibank recently estimated in a report that, due to reduced vehicle production at factories in Mexico, total North American auto production in April fell by 8% compared to the same period last year.
As new car supply decreases and prices rise, more consumers are turning to the used car market, leading many dealerships to face shortages of used car inventory.
Glenn Gottfried, a sales manager at an auto dealership near Ann Arbor, Detroit, told the WSJ, "Used car supply is constrained, and the supply shortage is especially severe for used cars in good condition."
Industry experts have pointed out that the Trump administration's tariffs on foreign-made vehicles could lead to higher prices not only for imported cars but also for new and used cars from American brands.
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