Trump's Tariffs Are Raising Car Prices As Automakers Pass Increased Costs Onto Buyers
Andy Kalmowitz
Mon, December 8, 2025 at 3:10 PM UTC
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Good morning! It's Monday, December 8, 2025, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. This is where you'll find the most important stories that are shaping the way Americans drive and get around.
In this morning's edition, Donald Trump's ill-advised tariffs are finally starting to trickle down to new car prices, Canada may pull its aid to Stellantis after the company said it would shift production to the U.S., Volkswagen is cutting back on its future investment plans because it's a bit strapped for cash and China's car market is in a serious funk right now.
Read more: Balance Of Performance Explained: Why Endurance Racing Is Harder Than Ever
1st Gear: Car prices are rising thanks to Trump
It took a little while, but it sure seems like U.S. customers are now seeing the impact of President Donald Trump's sweeping tariff measures on the automotive industry. It looks like many automakers waited until the model year changeover to start really raising prices.
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A recent analysis by Cloud Theory, which tracks car inventory on dealer websites across the country, found that OEMs are implementing more aggressive increases on 2026 MY vehicles compared to when 2025s hit dealerships last year. Its data shows that the average market price increase on 2026 models was nearly $2,000. When you compare it to the $400ish jump it saw in 2025's model year changeover, the difference is drastic. Additionally, for 2026, 23 models have at least a $2,000 price increase. That's up from just nine last year. From The Detroit News:
Any increase comes on top of average car prices that were already hovering around $50,000. Pair that with stubbornly high interest rates, and the average monthly car payment is now $766, according to Edmunds.com Inc., up more than 3% from a year ago. A record share of subprime borrowers has been falling behind on their auto loans this fall.
Yet the huge car sticker price increases tied to tariffs — which analysts originally warned might tally anywhere from an extra $5,000 to $15,000 per vehicle — haven't come to pass.
Among the reasons: competitive pressures between rival automakers, concern over blowback from Trump, large pre-tariff vehicle inventories that gave companies a lag time before pricing adjustments were needed, as well as policy adjustments that reduced the pain of the tariffs themselves.
Automakers opted to absorb many of the extra costs in the near term.
Destination charges on new vehicles are also rising, and it's pretty clearly an area where automakers are trying to claw back a bit of the money Trump's policies are costing them.
Another slightly more drastic measure some OEMs are taking is decontenting their cars. The Detroit News asserts that some companies are pulling features out of certain models to cut costs, all while keeping the sticker price the same. Shrinkflation and enshitification have hit the automotive industry.
At the very least, the massive jump of 10 or 15% price hikes almost certainly won't happen — at least not all at once. However, I wouldn't be surprised if there's a bit of a boiling frog scenario happening here. If you raise prices a few grand every year, maybe folks won't notice.
2nd Gear: Canada may pull aid to Stellantis
Canada is having it out with Stellantis because of a broken promise to build a new Jeep vehicle in the country. Back in October, the automaker announced a large investment its U.S. manufacturing footprint as a way of getting around the 25% tariffs President Trump slapped on imported vehicles. It'll end up bringing several vehicles back to U.S. manufacturing plants for production, including the new Jeep Compass.
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It's going to be built in Belvidere, Illinois. Crucially, that is not Brampton, Ontario, where the company previously promised the Canadian auto union, Unifor, it would be built in a 2023 collective bargaining agreement. Unifor's president, Lana Payne, described Stellantis' decision as a "betrayal." Now, things are getting ugly between the country and the company. From the Detroit Free Press:
On Dec. 4, Canada's Industry Minister Mélanie Joly said the Canadian government plans to serve Stellantis a "notice of default" — essentially a warning of breach of contract, preempting a lawsuit — after Stellantis renegotiated on its promises to the workforce of about 3,000 in Brampton.
Stellantis has received hefty financial aid from the Canadian government to fund automotive production in two industrial cities, Windsor and Brampton. Now the government is threatening to withhold funding — and claw back what it has already paid out — if the automaker does not get Canadian employees back to work building cars in Brampton.
According to the Canadian Broadcasting Corporation, Stellantis was paid $222 million as part of a deal to retool its plants in Brampton and Windsor. The Canadian government is threatening to stall payments on the rest of the loans, totaling $529 million, which were slated to be used to update both plants.
[...]
Stellantis Canada spokesperson Lou Ann Gosselin told the Free Press in a statement that "Stellantis continues to engage with the government in the dispute resolution process under the agreement. We are working towards our shared objective of securing a long-term, sustainable future for automotive manufacturing in Canada, including in Brampton."
Stellantis recently announced that it was adding about 1,500 new jobs to the Windsor Plant to build the new gas-powered Charger and the Chrysler Pacifica. That third shift is slated to begin in early 2026, and laid-off Brampton employees were the first to be offered those jobs, though it should be noted that Windsor is a four-hour drive from Brampton.
3rd Gear: VW could cut investments as money becomes a problem
Volkswagen is planning to cut back on its ambitious five-year investment plan because it's a bit, well, strapped for cash. It expects a 2025 cash flow of less than $580 million. Still, it's going to be dumping a lot of money into itself — $186 billion to be exact. Most of the spending will now target Germany and Europe, reinforcing the area it already does well. That means other areas like the U.S. and China will have to get by on a little bit less. From Automotive News:
"The focus is on Germany and Europe — on products, technologies, production sites and infrastructure. At the same time, we are funding development in future fields such as battery cells, software and autonomous driving," Blume told the Frankfurter Allgemeine Sonntagszeitung.
VW Group, which includes the Porsche and Audi brands, has been squeezed by tariffs on U.S. imports and fierce competition in China. This has hurt profits most notably at Porsche, which sells about half its cars in just these two markets and unveiled a major rollback on its electric vehicle strategy.
[...]
The automaker's supervisory board postponed the approval of the investment package, which was due to be approved in November, because the automaker faces a financing gap of about €11 billion for investments for next year alone, Bild newspaper reported last month, citing company sources.
By confirming lower investment figures to the Frankfurter Allgemeine Sonntagszeitung even before VW's management board and supervisory council lock in the planning round for 2026 to 2030, Blume is tightening the belt early.
VW had previously earmarked €180 billion for the 2024–28 period, while the 73rd planning round finalized this spring set €165 billion for 2025–29.
[...]
Blume reiterated the need for austerity at a recent staff meeting in Wolfsburg, saying VW has strong technology and attractive products but must boost productivity and streamline processes. Behind the scenes, that means eliminating duplicate structures and pushing software development, manufacturing and supply chains back to internationally competitive levels.
A renewed emphasis on Germany and Europe, while welcome to VW's employees in its home country, probably means a planned Audi plant in the U.S. is dead. Earlier this year, Blume said consideration for the plant was dependent on possible substantial financial support from the U.S. government. Last month, Bild reported that opening the Audi factory in the U.S. will be difficult because the money simply isn't there.
4th Gear: China can't break out of its sales downturn
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Something rotten is happening in China. Its annual car sales dropped 8.5% in November, and that represents the second straight monthly drop and its biggest decline in 10 months. It comes as buyers no longer feel the pressure to buy new vehicles before government subsidies end.
It's bad news for the world's biggest auto market, where sales hit 2.24 million units last month. That comes after October's 0.8% drop. From Reuters:
The deeper slide was "abnormal," as sales have generally been quite strong in the years' final two months, said Cui Dongshu, the industry body's secretary-general, but evoked conditions 17 years ago.
"A similar abnormality occurred in 2008 when consumption was under pressure," he added.
Sales of electric vehicles and plug-in hybrids made up a record 58.9% of total car sales. Subsidised auto trade-ins in favour of EVs and PHEVs exceeded 11.2 million units in the first 11 months, official data showed.
Reduced government subsidies near the end of the year are seen denting consumer sentiment nationwide.
Additionally, a big fall in gasoline car sales and a high base last year were attributed to the fall in overall sales last month, according to Cui, expecting full-year sales to grow by 5%.
Car sales are forecast to be largely flat in 2026 when competition in China becomes even stiffer, with "a possible all-time high number of new models", CMBI analysts said in a note.
To spur sales before purchase-tax breaks for EVs and PHEVs halve from 2026, many automakers have also rolled out subsidies of up to 15,000 yuan ($2,120) for orders before year-end which may not get delivered until next year.
It's very likely things won't continue at a rapid upward trajectory for much longer in China. Worries of overcapacity and excessive competition have forced Beijing to drop EVs from a list of strategic industries in a roadmap for the next five years. That means these companies could see even more challenges in the near future.
November represented BYD's third month of declining sales globally, despite record overseas shipments last month. It has achieved 91% of a trimmed sales target this year. Tesla, on the other hand, actually saw sales rise in November to 73,145 units after dropping to a three-year low of 26,006 sales in October.
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There was some good news when it came to exports. Overall, shipments out of the country rose 52.4% from 27.7% the month before. That's certainly something, but I'm sure these companies would like to see more success in their home market.
Reverse: The man who built Detroit
Kahn is one of the most important figures in the history of the American auto industry, yet you rarely ever hear about him. Take a little time today, go over to History.com, and read a bit about him and the important work he did.
On the radio: Darlene Love - Christmas Christmas (Baby Please Come Home)
It's my first Morning Shift of December, which means I've gotta start out with a bang. Darlene Love's "Christmas" has long been my favorite song of the holiday season, and if you disagree, please keep your trash opinion to yourself. That being said, it's Christmas music from here on out, so buckle up.
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