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US auto sales surged last month as consumers frontloaded major purchases in an attempt to get ahead of President Donald Trump’s aggressive new trade levies.
Retail sales jumped 1.4 per cent in March, the Census Bureau reported on Wednesday. The main driver of growth was a 5.7 per cent jump in seasonally adjusted auto sales, the biggest increase since January 2023.
The report showed that “savvy consumers” were bringing forward their big-ticket purchases in order to avoid tariff-driven price rises, said James Knightley, chief international economist at ING.
Trump imposed a 25 per cent levy on imports of foreign-made cars beginning April 3.
The additional cost will vary based on model and manufacturer, and will be absorbed by some combination of carmakers, dealers and consumers. Michigan consultancy Anderson Economic Group has estimated the tariffs will add between $4,000 and $10,000 to the cost of most vehicles, and about $12,000 to the cost of an EV.
Consumers “are aware” of Trump’s aggressive economic policy, and its various potential impacts, so “there’s undoubtedly a motor-vehicle tariff effect” driving stronger sales at the start of 2025, said Thomas Ryan, North America economist at Capital Economics.
But economists warned that March’s strong sales numbers could pave the way for a steep decline in spending later this year, especially when tariffs, as widely expected, begin to be passed downstream to consumers.
“We’re expecting to see a steep decline in demand as soon as next month,” said Joe Brusuelas, chief economist at tax and consulting firm RSM US. He said that motor vehicle sales would drop first, but warned of weakness “across the board” as Trump’s aggressive economic policy takes hold.
While consumer spending has remained robust in recent years, in part because many Americans built savings during the pandemic, Knightley said he expected that the consumer would be “less of a growth engine” later in the year amid fears of renewed inflation and job insecurity.
Americans’ unemployment expectations jumped last month to their highest level since the pandemic, as near-term inflation expectations surged, according to a recent survey by the Federal Reserve Bank of New York.
