Here’s why Trump tariffs may raise your car insurance premiums

The Trump administration’s tariff policies may raise auto insurance premiums for motorists, according to a new Insurify analysis. This at a time when drivers continue to see costs soar amid pandemic-era inflation.

A 25% tariff on imports from Canada and Mexico — which may take effect as soon as March — would increase annual full-coverage car insurance premiums by 8% to $2,502, on average, by the end of 2025, according to Insurify.

It estimates average annual premiums would rise 5% by year-end, to $2,435, without tariffs on Canada and Mexico.

Tariffs are expected to make cars and auto parts imported from Canada and Mexico — which are major suppliers for the U.S. market — more expensive. As a result, insurers pay out more money in claims when policyholders get into car accidents, and they pass on that financial risk to consumers via higher premiums.

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“When people think about tariffs, they typically think about goods they might get from somewhere else,” said Matt Brannon, a data journalist at Insurify who authored the analysis. “Many times, we don’t think about services like car insurance.”

He called the estimates of tariff impact “conservative.”

The Trump administration has proposed tariffs on several fronts during its first month in power.

Trump imposed a 10% additional tariff on all imports from China, starting on Feb. 4. Across-the-board tariffs on Canada and Mexico were also set to take effect that day, before the White House delayed them by a month.

About six out of every 10 auto replacement parts used in U.S. auto shop repairs are imported from Mexico, Canada and China, according to the American Property Casualty Insurance Association. Some car components cross the border multiple times before final assembly.

Trump also signed a sweeping plan for retaliatory tariffs on global trading partners, after a review set to be completed by early April. He signed an order to raise duties on aluminum and steel to 25%, up from 10%, and called for a 25% tariff on automobiles, pharmaceuticals and semiconductors.

Economists don’t necessarily expect all tariffs to take effect. Trump may be wielding them as a tool to extract concessions from trading partners, they said.

“However, using tariffs as a negotiation tool doesn’t mean no imposition of tariffs,” Bank of America Securities economists wrote Friday in a research note. Those experts don’t anticipate Canada or Mexico tariffs will come to pass.

However, if they do, they’d likely exacerbate already soaring premiums for cars, parts and insurance premiums, experts said.

“Threats of 25% tariffs on the North American borders — proposed, now delayed — would disrupt more than three decades of free trade across North America and rattle every corner of the automobile business, while proposed ‘reciprocal’ tariffs would add further price pressure to an auto industry already facing affordability issues,” Cox Automotive wrote in a recent commentary.

Motor vehicle insurance premiums are up by 12% in the past year, according to the consumer price index.

Insurance costs began to rise quickly in 2022 and 2023 as Americans worked from home less often and commuted to work more frequently, Brannon said.

“A lot more people hit the road at the same time, which led to more accidents,” he said.