New
Forecast Predicts Tariffs To Increase Auto Insurance Costs 60% Faster
Insurance costs were set to increase before tariffs—but new levies could raise costs by over $180
A report has revealed that higher sticker prices on new and used vehicles aren’t the only cost increases that automotive consumers face after President Trump’s 25% tariff on auto imports. American insurance comparison shopping website Insurify’s forecast says that tariffs on Canada and Mexico may cause car insurance rates to rise 60% faster, with coverage costs increasing 8% by the end of this year—up 3% from the original projection with no tariffs. This figure in cash would represent an increase of $2,313 to $2,502. Higher car insurance costs stemming from Trump’s tariffs are projected to hit New York state the hardest, with rates possibly increasing by $489 by the end of the year, followed closely by Florida, Nevada, and Georgia.
The insurance rate spikes stem from the US’ reliance on Mexico and Canada for vehicle parts and assembly. President Trump’s tariffs on steel and aluminum will likely exacerbate price increases for cars and parts. Mexico and Canada made up about 35% of US steel imports last year, and Canada supplied about half of the US’ aluminum imports. Mexico and Canada provide one-fifth of the US’ cars and light trucks along with 32% of its total auto parts supply, and Mexico alone delivered 43% of the US’ parts imports between January and November 2024. Mexico is also responsible for manufacturing 12 of the auto industry’s most popular models, including the Nissan Sentra, Nissan Versa, Nissan Kicks, Chevrolet Silverado, Chevrolet Equinox, Chevrolet Trax, Ford Maverick, Ford Bronco Sport, Ford Fusion, Ford Mustang Mach-E, Volkswagen Jetta, and Volkswagen Tiguan.
Related: The President’s New Tariffs Are Giving JDM Fans a Heart Attack
Car parts contribute to car insurance premium rates since comprehensive and collision coverage pay for damage repairs, and auto part prices influence repair costs. While President Trump’s new tariffs aim to increase domestic vehicle and parts production, the US faces an uphill climb, as certain manufacturing capacities currently don’t exist because of their high expense. Examples of these gaps in manufacturing capacities include wire harnesses, seat trims, and armrests. Higher vehicle costs from tariffs, which are anticipated to affect new and used inventories, will also drive domestic insurance rates. The US International Trade Commission studied what would happen if the government imposed auto tariffs and found that a 25% tariff would reduce American vehicle imports by about 74% and increase average car prices by 5%. The average cost of a new car in March was $47,462 in March, according to Kelley Blue Book. Used prices are expected to increase along with new vehicles since a slower supply chain stemming from tariffs can raise costs. Trump’s auto tariffs took effect on April 3, and duties on car part imports are scheduled to begin on May 3.
Final thoughts
Consumers were predicted to face higher insurance rates even without tariffs by the end of 2025, but drivers won’t feel this impact immediately, as insurance companies are restricted from price increases until it’s time to renew, which occurs every six or 12 months. Your insurance policy document will clearly state the duration of coverage. However, it’s best for drivers to begin budgeting ahead of time, with policy costs seeming inevitable.
