The American car landscape might soon look different. A looming tax on foreign-made vehicles has dealers nationwide thinking about what comes next. Not everyone sees this change as bad news. In fact, some companies actually think it could boost their fortunes.
CarMax, the country’s biggest seller of used vehicles, recently told investors that potential tariffs might help their business. Their reasoning follows a simple market principle – when new cars get more expensive, people look harder at used options.
“We’ve been through this before,” said Bill Nash, CEO of CarMax during an earnings call last Thursday. “If you go back to 2018 when there were tariffs, we actually saw a benefit in our business.” Nash explained that when prices for new vehicles climb, consumers tend to shift their attention to the pre-owned market.
The Biden administration announced in May its plan to increase tariffs on certain Chinese goods. These tariffs would affect electric vehicles, semiconductors, and other products. Many of these items play a critical role in car manufacturing today.
The tariff rates aren’t small either. Chinese electric vehicles would face a 100% tax, up dramatically from the current 25%. For semiconductor chips essential to modern vehicles, the rate would jump from 25% to 50%. These changes would likely push up prices across the automotive industry.
President Trump has also proposed his own tariff plan. His suggestion includes a 10% universal tariff on all imports, with an even higher 60% rate specifically on Chinese goods. Either administration’s policies would likely make cars more expensive for American buyers.
Used car dealers see opportunity in this situation. When new car prices rise, the value gap between new and used vehicles widens. This makes pre-owned cars more attractive to budget-conscious shoppers.
The potential tariff impact extends beyond just prices. Automotive industry experts worry about disruptions to the supply chain. “Tariffs create uncertainty in planning and may lead to material shortages,” explained Michelle Krebs, executive analyst at Cox Automotive. “This affects production schedules and ultimately vehicle availability.”
The used car market has already experienced wild swings in recent years. During the pandemic, prices soared when manufacturing shutdowns limited new car production. The average used car price peaked at over $28,000 in 2022 according to data from Cox Automotive. Prices have cooled somewhat since then, but remain higher than pre-pandemic levels.
CarMax’s position shows how some businesses adapt to shifting economic policies. While new car dealers might face challenges with higher-priced inventory, used vehicle specialists could benefit from increased customer interest.
“It’s about positioning yourself correctly in the market,” said Jessica Caldwell, executive director of insights at Edmunds. “Companies that can offer value alternatives when prices rise elsewhere often gain market share.”
For consumers, the message appears clear. If these tariffs take effect, expect to pay more for new vehicles, especially those with significant foreign-made components. This might drive more shoppers toward certified pre-owned programs and used car lots.
The Federal Reserve Bank of New York recently noted that transportation costs represent the second-largest household expense for many Americans. Any policy that increases these costs could have ripple effects throughout the economy.
Industry insiders suggest watching how manufacturers respond to potential tariffs. Some may absorb costs temporarily to maintain market share. Others might accelerate plans to shift production to American factories to avoid import taxes altogether.
CarMax’s optimistic outlook doesn’t mean the company sees tariffs as good policy overall. Rather, they’ve identified how their business model might benefit when market conditions change. Other used car retailers like Carvana and Vroom could experience similar advantages.
The ultimate impact remains uncertain. Much depends on which tariff proposals actually become policy and how global automakers adjust their strategies in response. What seems clear is that trade policies created in Washington will affect what sits in American driveways.
For shoppers currently in the market, automotive experts suggest considering your timeline. If you need a vehicle immediately, current conditions apply. If you can wait, the market might shift significantly as these policies play out.
“Used cars have always been the safety valve of the automotive market,” noted Karl Brauer, executive analyst at iSeeCars. “When economic conditions make new cars less accessible, used vehicles become the practical alternative for many Americans.”
As these potential tariffs move from proposal to policy, companies throughout the automotive ecosystem will continue adjusting their strategies. For CarMax and other used vehicle specialists, the changing landscape appears to offer more opportunity than obstacle.
