Market UpdateThe 25 Percent EV Tariff Risk Is Not Just About EVs. It Is About the Cheapest Car on the Lot.
The loudest tariff story right now is not whether EVs get more expensive in the abstract. It is that tariffs make the whole low-price end of the market harder to keep alive.
AP reported that tariffs are putting more pressure on EV pricing and inventory, while Car and Driver said tariffs have cost automakers $35 billion so far. That sounds like a manufacturer problem. It is really a buyer problem. When automakers absorb more cost, they do not eat it forever. They push harder on higher trims, trim incentives, or pull back on the cheapest models that were already thin-margin to begin with.
That is why this matters even if you are shopping for a gas sedan, a compact SUV, or a base trim truck. The cheapest version of a car is usually the first one to get squeezed. Not because it is the best seller, but because it is the least profitable.
What the market is telling us
- AP: tariffs are raising pressure on EV pricing and inventory, which can shift demand across the whole market.
- Car and Driver: automakers have already absorbed about $35 billion in tariff costs since 2025.
- Sidekick takeaway: once the pressure spreads, the entry-level car is usually where the pain shows up first.
Why the cheapest car matters most
The entry-level trim does three jobs:
- It brings first-time buyers into the brand.
- It keeps payment-sensitive shoppers from leaving the market.
- It sets the public price anchor for the rest of the lineup.
When that trim gets harder to build profitably, manufacturers do some combination of these moves:
- reduce supply
- cut incentives
- simplify equipment
- raise the base price
- steer buyers into more expensive trims
That is how a tariff story becomes a payment story.
The real cost comparison
| Pressure point | What buyers notice | What automakers do |
|---|---|---|
| Tariff cost | Sticker prices feel heavier | Raise prices or reduce discounts |
| Thin margins on base trims | Fewer affordable choices | Push buyers upmarket |
| Lower EV demand in some segments | More inventory risk | Slow production or rebalance mix |
| Supplier cost pressure | Hidden cost creep | Pass it through over time |
What you should do if you are shopping now
- Compare the base trim with the next trim up. The upgrade may look small on paper but get big fast once financing and insurance are added.
- Watch incentives closely. A lower sticker price is not always the best deal if the rebate disappears.
- Do not assume the cheapest car will stay the cheapest by the time you buy.
Our take
Tariffs are not just a headline about global trade. They are a slow squeeze on affordability.
The first cars to feel it are usually the ones buyers already rely on the most: the cheapest new cars, the bare-bones trims, the models with the thinnest profit margin. That is where the market gets less friendly for normal shoppers.
If you are shopping in 2026, the question is not just "Will this car go up?" It is "Will the cheap version still exist by the time I need it?"
Last verified: 2026-04-20
Sources
- AP News, "US electric vehicle industry is collateral ..." https://apnews.com/article/trump-tariffs-electric-vehicles-automakers-a106cce5b6acbf5d14ad1e583e301b50
- Car and Driver, "Report: Trump's Tariffs Have Cost Automakers $35 Billion So Far" https://www.caranddriver.com/news/a70758296/trump-tariffs-cost-automakers-35-billion/