Tariffs update: The impact on fleet operators
April 15, 2025
Element Senior Vice President, Strategic Advisory & Analytics, Steve Jastrow, offers insights and recommendations for fleet managers as they prepare for the impending tariffs.
One of the biggest issues that fleet managers and business leaders are currently navigating is the impact of automotive-related tariffs.
From supply chain to maintenance, it’s clear these tariffs will affect the fleet industry in several ways. What is less certain is exactly how fleets will be impacted and what fleet operators can do to reduce the aftershocks.
Complicating the issue is the multiple rounds of tariffs that have been announced in recent weeks and what they all mean.
To shine a light on how all these tariffs will affect the fleet industry, we sat down with Element’s Senior Vice President of Advisory & Analytics, Steve Jastrow. He provides invaluable insights into how the tariffs will impact the cost of vehicles, what can be done to avoid massive delays in the supply chain, and recommendations fleet managers can act on immediately.
Steve, there are multiple tariffs in play. Could you please give us a summary of the tariffs that will affect the fleet industry?
There are three tariffs either announced or already in play that will impact the fleet industry. They are:
- Tariff on imported vehicles – On March 26, the U.S. administration announced a 25% tariff on cars and car parts not built in the U.S. This tariff went into effect April 3 and is not included in the 90 day pause on tariffs effective April 9 . Importers of automobiles under the United States-Mexico-Canada (USMCA) Agreement will be given the opportunity to certify their U.S. content, and systems will be implemented to ensure that the 25% tariff will only apply to the value of their non-U.S. content. USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-U.S. content. It is unclear how long these tariffs will remain, but my guess is they will be in place for the foreseeable future.
- The Canada/Mexico tariff – This tariff is still on the table and a decision is expected within the next week. If enacted, vehicles from CA and MX will have a second 25% tariff applied (50% total). The duration of these tariffs is also unclear, but my guess is that these will be shorter-term in nature.
- The tariff on steel and aluminum – The 25% tariff on steel and aluminum has already been implemented. I believe these tariffs will be in place for a long period of time (at least through the Trump presidency).
How do the upcoming tariffs affect fleet acquisition costs, particularly for vehicles and parts sourced from outside the country?
SJ: It is important to first differentiate between the original round of announced tariffs and those announced on March 26th. The latter, for example, will impact all vehicles assembled outside the U.S., including the European Union and Asia (Canada and Mexico are included in this round). The original 25% (Canada and Mexico only) are still on the table and the administration is expected to announce what will happen with those in the next week. There is a scenario where vehicles from Canada and Mexico could have 50% tariffs applied.
It is important to note that we do not know how much of the tariff will be passed along to the consumer. We have been in close contact with all the OEMs, and they are still determining how to proceed. Continue to check with your Element team, the OEM reps, or visit our Operations alert and response center to keep abreast of the latest as we have witnessed this situation evolve quickly.
Also, and already implemented, are the tariffs on steel and aluminum. These tariffs were originally implemented in 2018 and have been largely negotiated away over the past six years. The updated tariff has removed the exceptions and is likely to remain permanently in place.
Most U.S.-built vehicles currently source these materials in the U.S., limiting the impact to between $500 and $3,000 per vehicle. This increase is unavoidable and should be factored into your budget planning moving forward.
The second area of concern for fleet operators in the U.S. is the proposed tariff on vehicles and parts imported from Mexico and Canada, with the latest round of tariffs announced on March 26. Vehicles produced entirely outside the U.S., such as the popular Chevrolet Equinox made in Mexico, could see a 25% - 50% hike in cost (applied to the cost of the vehicle content from outside the U.S., not MSRP or invoice). Vehicles produced outside the USMCA region will see a 25% tariff impact on the cost of the vehicle. My impression is that the U.S. does not have a process in place to easily determine U.S. vs. non-U.S. content, so for vehicles produced in Mexico or Canada, there may be a delay in seeing the impact of those tariffs.
For vehicles made in the U.S. that rely on components like engines from Mexico, the impact varies depending on the cost of imported content. This creates uncertainties, especially as the duration of these tariffs remains unclear. My advice is to prioritize vehicles manufactured predominantly in the U.S. and ensure flexibility with multiple Original Equipment Manufacturer (OEM) partnerships. The fleet industry learned some important lessons during and after COVID-19, especially about the fragility of global supply chains.
For those with price protection, you’ll want to check to see when that protection expires. Ford, for example, announced they will be removing their price protection as of April 2nd. GM will price protect all U.S. MY25 vehicles and the MY26 Equinox until further notice, while Stellantis will price protect any U.S. orders placed prior to April 4, 2025.
In either case, my recommendation is to place orders quickly. Most clients have price protection that will shield them from price changes. Those agreements could certainly be changed in future model years, and the new vehicle pricing (for future model years) could see the impact of tariffs applied to the initial pricing.
From a Canadian perspective, the retaliatory tariffs include vehicles, but not auto parts. They are following a similar track as the U.S. in that USMCA (or CUSMA) compliant vehicles will only see a tariff on the U.S. portion of the content. The fundamentals remain the same. Identify domestic makes and models, place orders early, and diversify OEM agreements. Canadian fleet leaders will also want to stay on top of what’s happening with retaliatory tariffs. This will be incredibly important to better understand the impact on their business.
You touched on the fragility of global supply chains. What steps should fleet operators take to reduce delays?
SJ: Supply chain disruptions are likely, especially if OEMs in the U.S. pivot to sourcing parts outside of Mexico and Canada or produce components locally.
While I don’t foresee a crisis as severe as the one we experienced during COVID-19, disruptions could still extend delivery times. This latest round of tariffs could last longer than the original ones levied against Canada and Mexico.
Fleet operators need to act proactively to reduce these delays. Place vehicle orders early to get ahead of potential bottlenecks or early closure of the order banks. Also, look to source vehicles manufactured in the U.S. to limit tariff impacts on your U.S. operations. If your current fleet has aged due to previous supply chain delays, prioritize high-mileage or high-impact vehicles for replacement to avoid extended downtime.
I also recommend diversifying OEM agreements. We learned after COVID that if you only have a relationship with one OEM and they can't meet your supply needs, it can take time to get what you need from other OEMs. By establishing relationships with multiple OEMs, you'll be better positioned to handle supply chain issues if they arise. Make sure to understand where vehicles are produced, not where an OEM is headquartered.
What impact will these tariffs have on the overall operational expenses of fleet companies, including things like fuel and maintenance?
SJ: Operational expenses will undoubtedly rise if the tariffs are implemented and passed along to the consumer. Maintenance costs, for instance, are expected to increase in the U.S. as parts sourced from Mexico or Canada become more expensive. Delays in sourcing components could arise if the OEMs look for U.S. suppliers, which can also lead to extended downtime for vehicles, affecting fleet utilization.
Fuel costs are another concern, as some oil imports from Canada face tariffs. Estimates suggest fuel prices could rise by $0.10 to $0.70 per gallon. While I don’t anticipate fuel shortages, even a small increase in fuel costs can significantly impact fleet budgets over time. As of April 10, fuel prices have been coming down on fears of a recession combined with increased output from OPEC.
Insurance premiums will likely rise as well since the higher costs of vehicles and parts will drive up repair and replacement expenses.
To partially offset these increases, optimizing preventive maintenance schedules and minimizing unscheduled downtime will be more critical than ever.
What financial strategies should fleet leaders in both the U.S. and Canada adopt to hedge against tariff-related cost increases?
SJ: Financial preparedness is key. The first step is to work alongside your finance team to reflect tariff-related price increases in vehicle acquisition budgets. Start treating certain tariffs, like the ones on steel and aluminum, as fixed costs rather than temporary spikes.
For vehicles, do not put off replacement cycles unless absolutely necessary. A $3,000 increase per vehicle may seem steep, but that cost could pale in comparison to the expenses incurred due to vehicle downtime or reliance on rentals. Effective preventative maintenance is also essential. Keeping vehicles in peak condition reduces unscheduled repairs, which often result in increased costs and prolonged downtime.
Also, evaluate the importance of each vehicle to your business operations. Replace high-priority vehicles immediately and hold off on low-priority replacements if the tariff’s temporary nature warrants it. Continue leveraging data analytics to identify opportunities for route optimization and fuel efficiency.
What are your top three recommendations for fleet managers today?
- Prioritize domestically built alternatives: With shifting tariffs and international trade policies, prioritizing vehicles manufactured predominantly locally can help organizations reduce their exposure to unexpected costs. By focusing on local alternatives, companies can avoid tariff-related price hikes and ensure more predictable budgeting for fleet procurement.
For U.S. operations, it’s also important to understand the total cost of ownership of your vehicle options. Domestic models may still be significantly impacted by the tariffs if their parts are sourced outside of the U.S.
On top of the vehicle’s price, things like OEM concessions and price protection agreements will help determine which vehicle option is most suitable for your fleet. Collaborate closely with your fleet advisors to assess your pricing options as well as your current lineup. They can also help identify domestic makes and models that meet your operational needs, such as vehicle capacity, fuel efficiency, or specialized features. - Stay on schedule with replacements: Delaying fleet replacements might seem like a cost-saving measure in the short term, but it often leads to long-term challenges (we are still digging out from the last supply chain crisis). Older vehicles are more prone to breakdowns, resulting in higher maintenance costs, unplanned repairs, and increased downtime, which impacts productivity.
Additionally, aging fleets consume more fuel and may not meet newer efficiency or emissions standards, further driving up operational costs. Adhering to planned replacement cycles ensures that your fleet remains reliable, efficient, and cost-effective. Regular vehicle updates also mean access to the latest technology and safety features, enhancing overall performance and reducing operational risks. - Stay informed: Things are changing and they're changing quickly, without a lot of warning. So, for our clients, I suggest you check in with your advisor, your account manager, and your FPS partner to find out the latest. If we don't have the answer at our fingertips, we'll figure it out and get back to you. For those navigating this on their own, we have an open portal on our website where we compile the latest events along with some recommendations. Ultimately, staying informed empowers your team to adapt, navigate challenges, and stay prepared for whatever may come.
Successfully navigating the uncertainties created by these tariffs requires clear-eyed planning and decisive actions. Contact us to learn how we can guide you through these challenging times.
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