The trade war that erupted in North America Tuesday will undoubtedly disrupt the auto industry and raise already inflated vehicles prices, Cox Automotive analysts said.

Canada responded in kind to 25% U.S. trade tariffs on Tuesday, and Mexico’s president also vowed to impose its own tariffs, though it hadn’t yet taken specific action. 

The Trump administration also doubled an earlier imposed 10% tariffs on goods from China, which retaliated with tariffs of as much as 15% on imported U.S. products.

The unpredictability, along with the added cost, is disruptive to the U.S. auto industry, said Cox analysts, who pointed out that about 44% of new vehicles sold here last year were imported from Canada, Mexico, Europe and Asia. 

Since there’s been free trade between the North American countries for decades, there’s no recent precedent with which to predict specific outcomes, but a trade war will have repercussions, the analysts said.

“We have no history to study for this, but there will be implications. It is not even clear if the U.S. government has a way to efficiently track the movement of goods and impose duties, but set that aside: Production will be disrupted, supply will be restricted, and prices will go up,” said chief Cox economist Jonathan Smoke.

Smoke said consumers with tax returns in hand are likely to buy major goods such as cars quickly to lock in current prices, but that uptick would be short-lived in tariffs linger to cut demand. The drag on overall spending would also weaken larger economic growth, he said.

Tariffs will add costs for automakers, which will pass those costs on to consumers, said Executive Analyst Erin Keating, but she said that, “Ultimately, it is the volatility in policy that is most damaging to the automakers’ ability to strategize for the future; the uncertainty is far worse than knowing what hand they’ve been dealt.”        

The tariffs could upend the recent post-pandemic price normalization, said Senior Economist Charlie Chesbrough.

“Just as the industry seemed to be finding stable ground, new obstacles are thrown in place. How long higher tariffs are held in place is the industry’s big question right now. Higher prices and border disruptions could result in lower volume.”

Cox’s forecast of 16.3 million in new-vehicles sales this year in the U.S. is “now in question,” Chesbrough said.