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On April 2, 2025, President Trump announced a new Executive Order imposing a 10% customs duty on imports from all countries, with tariffs up to 50% on goods from countries with significant trade deficits with the US. These tariffs, effective from April 5, 2025, will impact Middle East countries, including the UAE and KSA, with an additional 10% tariff, while others like Jordan, Algeria, and Iraq face even higher rates. Along with these tariffs, a 25% duty on automobile imports and key auto parts from third countries, including the Middle East, will be implemented. These measures, framed as a “national emergency” to protect US workers, may disrupt global supply chains and international trade stability, with potential retaliatory actions from other countries affecting trade predictability.
How Trump’s Tariff Policy Affected the Automotive Market in Dubai
The tariffs imposed by the U.S. during Trump’s presidency targeted various sectors, including the automotive industry. The tariffs on steel and aluminum imports from various countries created a ripple effect that reached international markets, including Dubai. Here’s how these tariff policies influenced the automotive market in Dubai:
1. Increased Car Prices Due to Higher Production Costs
A recent analysis by the Center for Automotive Research reveals that President Trump’s 25% auto tariffs, imposed in April 2025, will cost U.S. automakers around $108 billion, with Detroit giants Ford, GM, and Stellantis facing an additional $42 billion in expenses. The study estimates that the Detroit Three will pay nearly $5,000 per car for imported parts and around $8,600 for each imported vehicle. These tariffs, effective from April 3, have forced automakers to adjust production, including GM ramping up truck production in Indiana and Stellantis temporarily halting operations in Mexico and Canada. The overall industry faces an average tariff cost of $4,239 per vehicle, while the Detroit Three are looking at $4,911.
References: khaleejtimes
2. Pressure on Car Dealerships
President Trump’s 25% tariffs on imported cars and auto parts have caused a ripple effect in the automotive market, with automakers facing pressure to adjust pricing strategies. Manufacturers like Toyota, with lean inventories, may have to raise prices soon due to their low vehicle supply, while companies with more stock, like Ford and Hyundai, can delay price hikes. As tariffs affect both the cost of vehicles and parts, consumers are rushing to buy pre-tariff cars to avoid price increases, resulting in heightened demand and faster sales. In the long term, this will likely lead to higher prices and more people turning to used cars, which could further inflate their market value.
For dealerships, the situation is mixed. Companies with high inventories are better equipped to handle the tariff’s immediate impact, but those with limited stock, like Toyota, could see price hikes sooner. Analysts predict that higher car prices and increased insurance premiums will drive more U.S. consumers into the used car market, further pushing up prices. Despite these challenges, luxury automakers like Bentley and Ferrari are already passing on costs to consumers, while others are waiting to observe competitors’ moves before adjusting their prices.
References: ZAYWA
3. Supply Chain Disruptions and Delays
The implementation of new 25% tariffs by US President Donald Trump on imported cars and auto parts is expected to disrupt global automotive supply chains, potentially leading to price increases in the UAE for certain vehicles, particularly American and luxury European models. However, experts suggest that the UAE market could benefit from this shift, with manufacturers redirecting excess inventory to the region, possibly resulting in stable or even lower car prices. While there may be some delays in new car models and spare parts, there are also opportunities for Asian-made vehicles, especially from China, to gain market share in the UAE due to competitive pricing and efficiency.
References: JobXDubai
4. Growth of the Used Car Market
With new car prices rising due to tariffs, many consumers in Dubai turned to the used car market as a more affordable alternative. This shift was particularly evident among middle-income buyers who could no longer afford to buy new cars, especially mid-range vehicles from brands like Ford and Honda. As a result, demand for used cars increased, particularly for high-quality, well-maintained vehicles.
The increase in demand for used cars also led to higher prices in the pre-owned vehicle market. Luxury car buyers, who were initially targeted by price hikes on new cars, turned to used versions of their preferred models. This led to greater competition in the used car market, with dealerships focusing more on expanding their inventories to cater to this demand.
5. Innovation and Diversification: The Rise of Electric Vehicles (EVs)
One of the positive effects of Trump’s tariffs on the automotive market in Dubai has been the acceleration of the adoption of electric vehicles (EVs). The price hikes on traditional combustion engine vehicles made consumers more inclined to explore alternative options like electric and hybrid vehicles. As the UAE continues to push for sustainability and green energy, Dubai’s automotive market has seen a rise in the demand for electric vehicles from brands like Tesla and Nissan.
EVs are generally cheaper to produce, particularly because they require fewer raw materials like steel and aluminum, which were impacted by the tariffs. Additionally, the UAE government’s efforts to promote EV adoption, such as offering incentives and building more charging infrastructure, have made electric cars an attractive option for environmentally-conscious consumers.
Conclusion: Adapting to Change
In conclusion, Trump’s tariff policy had both short-term and long-term effects on Dubai’s automotive market. While the rise in car prices and supply chain disruptions posed challenges for both consumers and dealerships, there were opportunities for growth in the used car market and a shift toward more sustainable options like electric vehicles. Dubai’s resilience as a global automotive hub has allowed it to adapt to these changes, and the market continues to evolve in response to global economic shifts.
As tariffs remain a contentious issue in international trade, understanding their long-term impact on Dubai’s automotive sector will be crucial for businesses and consumers navigating the future of the market.