GlobalData forecast: Tariffs could cost US 1.5M units in light vehicle sales

Dublin — The U.S. can expect light vehicle sales to drop by between 1 million and 1.5 million units in 2025 if the tariffs put in place by the Donald Trump administration stay intact.

That prediction was part of an auto market report delivered by Robert Simmons, responsible for tire and rubber market research for GlobalData, delivered April 9 at the International Institute of Synthetic Rubber Producers's Annual General Meeting in Dublin.

Simmons presented his report several hours before President Trump paused reciprocal tariffs on most countries other than China for 90 days and is instead implementing a base tariff of 10 percent on most goods. The pause does not extend to sectoral tariffs, including a 25 percent duty on vehicle imports that went into effect April 3, as well as steel and aluminum levies.

Before the wide ranging tariffs kicked in, GlobalData was set to project U.S. light vehicle sales roughly the same as the approximately 16 million units sold last year. After a dropoff the first year of COVID followed by a bounce back in 2021, supply chain issues affected the market negatively in 2022. But 2023 and 2024 recovered nicely, Simmons said, and the market research firm expected similar progress this year until the tariffs hit.

They include the 25 percent duty on imported vehicles that went into effect on April 3, and an upcoming tariff of the same percentage on auto parts and components that will kick in early next month that will include car and truck tires.

For vehicles imported from Mexico and Canada that are compliant with the trade agreement within North America, the tariffs will only be enacted on the parts of the vehicle that aren't made in the U.S.

Simmons also said that with roughly 47 percent of vehicles sold in the U.S. made outside of North America, most of those vehicles will be subject to the 25 percent duties.

"The tariffs are pretty wide ranging and at the moment they are sticking," Simmons told attendees of the IISRP's AGM. "Prices for vehicles are going to rise in the states. OEMs and the supply chain may absorb some of those costs, and you may see more incentives offered."

Besides production lost from the three nations in North America, other regions that will lose sales of vehicles they export into the U.S. include Japan, South Korea and Europe.

"If the tariffs continue, that goes on for a longer period of time," Simmons said.

And the 1 million to 1.5 million drop in unit sales projected by GlobalData takes into consideration only the direct impact of the tariffs. "We haven't said we'll end up with a global recession," Simmons said. "That would take even more vehicles out of the system."

Commercial truck sales also are expected to drop, he added. The research firm projected a 10-percent decline before tariffs, but now boosted that to 20 percent.

Simmons told Rubber News that there will be a fallout for tires and rubber components makers. The reduction in OE sales will mean fewer tires sold to auto makers, and the tariffs will apply to sales of car and truck tires in the aftermarket.

In addition, ag and off-the-road tires will be subject to tariffs under the reciprocal tariffs not covered by duties imposed on the auto sector.

"Can U.S. manufacturers produce more tires? Yes, probably some of them can," Simmons said. "You may get some more production in U.S., but the market is still dependent on imports. There's not enough to replace all the imports, and you can imagine consumers' income will be under pressure as well, so you're still going to need those low cost imports as well."

Simmons wouldn't speculate on the prospects of negotiations bringing the tariffs to an end, or at least bringing them down some. "There definitely seems to be some negotiations going on, so whether they stick at this level or they stick at a lower level, it's just uncertain," he said. "Look at what it is at the moment. And it's stuck more than some people thought it was going to stick. Then you see what happens from there."