Contributors

Halbert B. Rasmussen

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The U.S. government has announced a one-month delay in the implementation of new tariffs on vehicles and parts imported from Canada and Mexico. These tariffs, originally scheduled to take effect immediately, have been postponed to allow further discussions between policymakers and industry stakeholders.

Who is affected?

Franchise dealerships selling vehicles manufactured in Canada or Mexico

Tariffs on imported vehicles, and domestically manufactured vehicles with significant imported content, could result in price increases, negatively impacting retail demand and dealership revenue.

Parts distributors & dealerships handling repairs

Increased costs for imported parts may affect service and warranty pricing.

Automakers & suppliers with cross-border operations

Companies engaged in importing vehicles and parts may need to adjust supply chain and pricing strategies to mitigate the impact of tariffs.

Key legal considerations for auto dealers

Consumer sales & leasing impact

Higher vehicle prices could lead to lower sales and lease volume, which may create financial challenges for dealers, particularly those with significant inventory flooring commitments. Brand performance relative to the industry as a whole (i.e., market share) may face material adverse changes for brands featuring vehicles or vehicle content subject to the tariffs.

Compliance with State & Federal pricing and consumer protection laws

If manufacturers or dealers adjust pricing due to tariffs, they must ensure compliance with disclosure and pricing regulations. For example, if a retail buyer placed an order for a new vehicle with a dealer before the dealer received written notification of a tariff-related price increase from the manufacturer, California law would prohibit the dealer from passing on that price to the purchaser.

Inventory financing & contractual commitments

Dealers with floor plan financing conditioned on meeting financial covenants, as is common where the floor plan lender also provides capital and real estate financing, may find meeting those covenants, and any required curtailments, more difficult if cash flow is reduced by slower sales.

Regulatory changes & future legal challenges

The legal and regulatory landscape remains uncertain, with potential for further delays, modifications, or challenges to the tariff policy.

We will continue to monitor developments and provide updates. If you have questions about how this may impact your dealership’s legal obligations, please contact us.