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.
Source: 2026-09-28Federal Reserve Board
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.