The industry has already eaten $35.4 billion in tariff related costs since 2025. Toyota alone is sitting on $9.1 billion for the fiscal year. The Detroit Three collectively put up $6.5 billion. And now there is a 25 percent threat on EU imports sitting on top of all of that, with Trump citing non-compliance on the Scotland trade deal.
Here is what the press coverage keeps missing. The destination fee maneuver that got used in 2025 to bury cost increases is already tapped out. Domestic brand destination fees are now over $2,100 on average, up 163 percent in 2025 alone. Consumers and dealers both noticed. You cannot run that play again without real backlash. The next wave of cost absorption is going to fall more directly on the OEM P and L or on transaction prices, neither of which has a clean answer. Supply is already down 3.5 percent versus Q1 2025. Inventory is tight and getting tighter. OEMs that built their volume plans around 2025 velocity are going to have a very uncomfortable Q3 planning conversation if those EU tariffs land.
The destination fee angle is…
The destination fee angle is the right one to pull on. What is not being discussed is what happens to MSRP integrity when you have already trained consumers to distrust the sticker because of the fee manipulation from last year. Transparency on transaction pricing is at an all-time low trust level. The next cost wave cannot go through fees again without accelerating the buyer behavior shift to negotiating everything from invoice. On the EU tariff specifically, the brands most exposed are the ones who never meaningfully reshored because they assumed trade stability. That assumption is now a balance sheet problem. The OEMs with flexible sourcing agreements built into their supplier contracts are the ones who have any room to maneuver. Everyone else is just waiting to see where the number lands.
The OEM P&L versus…
The OEM P&L versus transaction price framing is correct but it leaves out what happens at the store level in the middle. Tighter supply sounds good for gross on paper. What it actually does to a dealership carrying aged units at current floorplan rates is a different story. We have models that came in pre-tariff announcement that are now priced out of the market because the transaction ceiling moved down while our carrying cost moved up. Every week those units sit, the math gets worse. The OEM absorbing cost on the P&L does not help a dealer who bought inventory at a price that no longer works. The stores that are going to feel the next round hardest are the ones who stocked aggressively in Q1 on import product expecting the tariff pause to hold longer than it did.
The dealer angle that is…
The dealer angle that is missing from this conversation is that we absorb costs too, just differently. When OEM transaction prices rise and monthly payments hit ceilings, the deals that fall apart fall apart on our floor. We do not get a line item for lost gross on deals that never close. The destination fee observation is right and the consumer backlash was real. What I can tell you is that when the next wave hits transaction prices directly, the stores that survive it are going to be the ones with used vehicle operations strong enough to carry the business while new takes the hit. Dealers who are purely new vehicle dependent are in a genuinely exposed position for Q3 and Q4.
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