The Federal Reserve Board published a FEDS Note finding that changes in the mix of imported light vehicles can materially distort unit values, complicating assessments of price movements and tariff pass-through. Following the April 2025 introduction of tariffs on finished vehicles, unit values fell by at least 10% for several major trading partners, while model-level average prices generally remained near or above fourth-quarter 2024 levels. The divergence varied by country. Japan shifted moderately toward higher-priced models, while South Korea moved toward lower-priced vehicles, producing a composition effect of about 4% compared with a roughly 15% decline in unit values. South Korea’s shift reflected a fall in electric vehicles’ share of imports from 8.9% in the fourth quarter of 2024 to 0.8% in the first quarter of 2026. Even after adjusting for composition, however, substantial gaps remained between model-level prices and border unit values, potentially reflecting partial tariff absorption, strategic transfer pricing or changes in the relationship between retail and border prices.
Federal Reserve Board analysis finds vehicle import mix shifts can distort post-tariff unit values
A Federal Reserve Board FEDS Note finds that shifts in the mix of imported light vehicles can materially distort unit values and assessments of tariff pass-through. Composition effects differed across countries, but they did not fully explain the sharp decline in vehicle unit values after tariffs took effect in April 2025.