Vehicle sales could stall amid economic uncertainty largely driven by President Donald Trump’s tariff plans, economists at Cox Automotive are predicting.

Chief economist Jonathan Smoke said the analytics company, which surveys more than 1,000 car dealers to produce a quarterly sentiment index, revised its forecast to reduce the number of new vehicle sales expected this year from 16.3 million to 15.6 million, a 4.3% decrease that equals a 700,000 vehicle decline.

Smoke made the forecast Wednesday, just hours before Trump imposed a 25% tariff on imported cars and light trucks.

Smoke said while their original forecast predicted sales of new vehicles would increase by one to two percent over last year, their updated projections represent a decrease of one to two percent from last year.

“If we do see circumstances turn for the negative, it will be a squandered opportunity as we were poised for continued growth,” Smoke said.

But making projections can be difficult with Trump’s tariff plans constantly evolving, Smoke said.

“We’ve seen uncertainty grow dramatically over the last two months, and uncertainty can be like a deep fog that simply ruins the morning commute,” Smoke said.

While the updated projection represents what Cox Automotive analysts view as the most likely scenario, Smoke said there’s enough uncertainty that it’s still possible to meet their original projections – or to see even more detrimental impacts of a full-blown trade war.

“The opportunity is still there, but storm clouds are forming on the horizon,” Smoke said.

In addition to announcing plans to implement 25% tariffs on automakers that do not produce cars in the U.S. beginning next week, Trump said the administration is also set to implement tariffs on imports from Canada and Mexico next week, in what the President has referred to as “Liberation Day.”

United Auto Workers President Shawn Fain praised the tariffs in a statement, saying that Trump is “stepping up to end the free trade disaster that has devastated working class communities for decades.”

“These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.,” Fain said.

But Smoke said tariffs would be “highly disruptive” to North American vehicle production, resulting in tighter supply, higher prices and lower production and sales.

Even when vehicles are assembled in the United States, parts often cross between Canada, the United States and Mexico several times.

Depending on the extent of the tariffs, Smoke said the cost of a vehicle made in the United States could increase by $3,000 and the cost of a vehicle assembled in Canada or Mexico could go up by $6,000 or more.

It would also result in 20,000 fewer vehicles being produced per day, Smoke said.

Charlie Chesbrough, a senior economist for Cox Automotive, said that would exacerbate supply shortages that began during Trump’s first term in office, when the COVID-19 pandemic caused supply chain failures that sent prices skyrocketing.

Had pre-pandemic trends continued, Chesbrough said, the cost of a new vehicle today would be nearly 10% below where they currently are. While prices were declining for much of the last year, they never reached their pre-pandemic levels and are now on the rise again, which could be accelerated by tariffs.

“We expect sales to fall, new and used prices to increase and some models to be eliminated if those tariffs persist,” Smoke said.

Tariffs could also lead to budget-friendly vehicle lines being eliminated, Smoke said, as half of the affordable vehicles sold in the United States are assembled in Canada or Mexico.

And while many vehicle sales have been driven by wealthier individuals, Smoke said economic uncertainty – which has also manifested in the form of a declining stock market – makes them less reliable purchasers.

“Affordability has been holding back market potential for years, and between rates and tariffs, affordability looks to get much worse,” Smoke said.

Smoke added that the actions taken by the Trump administration have been “far more aggressive than anyone expected.”

“Worse still, the administration has communicated that they are willing to see the economy deteriorate if that is necessary to accomplish their goals,” Smoke said.