A considerable amount of the sticker price for a heavy tractor is composed of fees and taxes, and next week that will be going up.
President Donald Trump on Thursday announced on his Truth Social platform that, effective Wednesday, Oct. 1, the U.S. will levy 25% tariffs on all imported heavy-duty trucks.
All the major North American heavy-truck manufacturers are global companies with assembly operations in the U.S., but many supplement those plants with sister facilities in Mexico. Under the U.S.-Mexico-Canada (USMCA) free trade agreement—a deal Trump signed in 2018 that went into effect in 2020, replacing the North American Free Trade Agreement (NAFTA)—those trucks have generally been allowed into the U.S. tariff-free, but recent diplomatic history suggests that is about to change.
The White House did not respond to questions from CCJ about whether this new tariff will be levied on top of USMCA or if those trucks will remain exempt as long as 75% of the value in materials and labor is sourced from North America, and whether the new tariff includes parts, which were at issue in the Bureau of Industry and Security Section 232 National Security Investigation of Imports of Trucks earlier this year.
Jason Miller, Eli Broad Professor of Supply Chain Management at Michigan State University, said he was "very confident" the new tariff will override USMCA as the finished passenger vehicle tariffs now do. Mexico, the only country from which the U.S. imports finished on-highway heavy-duty trucks, accounted for 71.9% of heavy truck imports last year by dollar value, according to USA Trade Online.
Trump billed the new tariffs as one that protects truck makers "from the onslaught of outside interruptions" and one that supports truckers' financial health. However, in comments to the Security Section 232 investigation, much of the industry—including the American Trucking Associations, the Truckload Carriers Association, Daimler Truck North America (DTNA), International Motors, and Volvo Group—opposed them.
Given the lack of followup detail from the Trump administration since Thursday's announcement, DTNA and Volvo Group told CCJ Friday the OEMs are now in a holding pattern.
"We look forward to seeing more details on the plans and how they will be implemented," said John Mies, Volvo Group North America Senior Vice President of Corporate Communications.
American Transportation Research Institute (ATRI) research shows that the average purchase price of new Class 8 trucks jumped $40,000 from 2014 to 2023. The current average price is more than $170,000, with over 20% of that increase coming within the last four years. A new 25% tariff pushes the projected total for a new truck to $212,500, and the 12% Federal Excise Tax (FET) on top of that brings the total to $238,000—$68,000 in FET and new fees alone.
Paccar, which builds more than 98% of its heavy-duty on-highway Peterbilt and Kenworth trucks for the U.S. market in America and is a net U.S. exporter of heavy-duty vehicles, was the only Big Four manufacturer to support new tariffs during the public comment period in May.
"We look forward to reviewing the details of the MD and HD Truck Section 232 tariff announcement made by the President as they become available," a Paccar spokesperson told CCJ via emailed statement.
Truck and trailer payments are already at record high levels, according to ATRI research, having jumped nearly 9% last year over 2023.
U.S. truck production is already stunted by low order intake and existing tariffs on input goods like steel and aluminum, and Miller said it's unlikely that truck OEMs could easily shift more truck assembly to U.S. plants to avoid the new tariffs.
"We currently produce a lot of this equipment here in the USA," Miller said. "I'm skeptical domestic production would expand to handle all demand, as this would represent a huge capital investment need during a period of weaker demand."
The ratio of imports of heavy trucks over imports plus domestic production is 35%, Miller noted, and the ratio of imports over implied consumption (imports over imports plus domestic production minus exports) is 42%. As such, he said, no matter how you look at it, "carriers looking at buying trucks are about to see a major increase in equipment costs, especially since heavy truck manufacturing is an oligopoly where the top four firms accounted for 76% of domestic production in 2022 per the Economic Census."
Avery Vise, FTR's Vice President of Trucking, noted that a new tariff on heavy trucks from Mexico could provide a near-term boost in retail truck sales as fleets rush to buy as many trucks as they can justify and afford that are unaffected by tariffs. He added that while truck manufacturers with production in Mexico have indicated that they can move some assembly work to the U.S., "We presume that such moves would come with added costs that manufacturers would have to either pass along to truck buyers or absorb as reduced margins."
Assuming the new tariffs also apply to key components for heavy trucks as was contemplated in the Section 232 investigation, there would be some cost increases even for U.S.-built trucks, Vise noted.
Short term sales boom?
In a stronger market, Vise said, the prospect of a large price swing would spur a frenzy to snap up available inventory. Given current elevated retail inventories of trucks, he added, an increase in truck sales could be significant despite the currently weak truck freight market.
"At a minimum, though, truck owners that need to replace equipment soon will likely accelerate their purchasing. Fleets will be limited to the specs of trucks already on dealer lots, of course, but given the potential markup for trucks built after tariffs kick in, many truck buyers surely will find that they are more flexible than they have been in the past," he said. "Once the current inventory is depleted, of course, tariffs would become just one more impediment to buying new trucks until freight market conditions are stronger and consistently so."
