Will tariffs impact auto insurance costs?

President Donald Trump’s 25% tariffs on all cars and trucks will take effect, as scheduled, on April 3, and tariffs on auto parts will take effect on May 3.

The tariffs will cover $600 billion worth of vehicles and auto parts imported annually.

That will result in an increase to the cost of cars and car parts, along with auto insurance.

“Whatever the percentage of tariffs is on that car or that part, will likely be passed on by the manufacturers and the repairers,” Dave Snyder, vice president of the American Property Casualty Insurance Association, told WTOP.

Snyder said figuring out the exact impact of tariffs isn’t clear right now, but that “the numbers we’ve projected that the overall cost for personal auto alone” could go up by as much as $26 billion to $52 billion per year as long as the “tariffs, worst case, actually are imposed by the president.”

The tariffs will impact almost every make and model of car on the road.

“‘American-made’ cars aren’t necessarily American made,” Washington state Insurance Commissioner Patty Kuderer said. “These short-sighted, stupid tariffs will push rates up and, without question, will make driving more expensive for everyone.”

How do tariffs impact auto insurance?

Car insurance costs are based on a company’s total claims costs. In Washington, insurers must have their rates approved before they’re used. To do this, they file their proposed rates with the Office of the Insurance Commissioner and our actuarial staff reviews their financial statements to ensure a change is justified.

Those financial statements include the company’s costs to cover claims and administrative expenses, though claims costs are the largest driver factoring into a rate change.

Car repairs and replacements costs, then, are a huge factor in changing insurance costs; if something an insurance product pays for gets more expensive, the loss costs will increase and create upward pressure on insurance premiums.

According to the U.S. Bureau of Labor Statistics, car insurance increased an average of 11.8% in 2024. In Washington, rates increased an average of 17.5% in 2024.

Cars and the materials and parts involved in repairing them just became more expensive due to tariffs. Those costs will be passed on to policyholders once insurance companies have the financial documentation to justify a rate change.

“This will hit consumers in their wallets,” Kuderer said. “Maybe not today, maybe not tomorrow, but soon, and for the rest of these tariffs’ existence.”

Insurance is a lagging indicator, and changes are made after the fact. Rates tend to play catchup with economic trends.

How much could tariffs increase auto insurance rates?

It depends on how long the tariffs are in place, but the 25% tariffs against Canada and Mexico alone were expected to increase the cost of auto insurance claims in the U.S. by between $7 billion and $24 billion, according to the American Property Casualty Insurance Association.

An Insurify study projected the tariffs on Canada and Mexico, alone, were expected to push auto premiums up 8% by the end of 2025, up from a 5% increase before tariffs.

Nationwide, the corresponding premium increases could range from $35 to $120 per vehicle per year, according to Robert P. Hartwig, clinical associate professor and director of the Center for Risk and Uncertainty Management for the Darla Moore School of Business at the University of South Carolina.

“This increase will be in addition to increases due to other factors, such as the cost of labor and increases in the price of domestically manufactured parts. Tariffs imposed on Chinese-manufactured parts and separate tariffs on imported steel and aluminum (sourced from all countries) will still push up premiums. Tariffs — taxes — are the last thing inflation-weary drivers want or need. According to the U.S. Bureau of Labor Statistics, auto insurance premiums were up 11.3% in 2024. Presently, there is little relief in sight for motorists,” said Hartwig.