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According to a new insurance analysis, the Trump administration’s tariff policies could raise car insurance premiums for drivers. This is a time when drivers continue to see costs rise amid pandemic-era inflation.
According to Insurify, a 25% tariff on imports from Canada and Mexico could take effect immediately in March, but by the end of 2025, an average increase of 8% to $2,502 Masu.
Without tariffs in Canada and Mexico, the average annual premium is estimated to rise by 5% by the end of the year, up to $2,435.
Tariffs are expected to make cars and auto parts imported from Canada and Mexico, the leading suppliers of the US market, more expensive. As a result, insurance companies pay more money on claims when the policyholder falls into a car accident and pass on that economic risk to the consumer via higher premiums.
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“When people think about tariffs, they usually think about products they may get from elsewhere,” said Matt Brannon, a data journalist at Insurify, who wrote the analysis. “In many cases, we don’t think about services like car insurance.”
He called estimates of the impact of tariffs “conservatives.”
Trump tariffs proposed so far
The Trump administration proposed tariffs on several fronts in the first month of power.
Trump has imposed an additional 10% tariff on all imports from China from February 4th. Full tariffs in Canada and Mexico were also scheduled to come into effect that day before the White House was delayed by a month.
According to the American Real Estate Victim Insurance Association, about six of the 10 car replacement parts used in repairs at US auto shops are imported from Mexico, Canada and China. Some automotive components cross the border multiple times before the final assembly.
Trump has also signed a plan to clean up retaliatory tariffs against global trading partners after a review was set up to be completed by early April. He signed an order to raise the aluminum and steel duties from 10% to 25%, calling for 25% tariffs on automobiles, pharmaceuticals and semiconductors.
Economists do not necessarily expect all customs duties to take effect. They may be using them as a tool to extract concessions from their trading partners, they said.
“However, using tariffs as a negotiation tool does not imply tariff levies,” an economist at Bank of America Securities wrote in a research note on Friday. These experts do not expect tariffs to be enacted in Canada or Mexico.
But if that’s the case, it’s likely that they’ve already already raised premiums for cars, parts and insurance premiums, experts said.
“The 25% tariff threat at North American borders (suggested, currently delayed) has disrupt free trade for over 30 years across North America, rattling every corner of the automotive business, and “mutual” tariffs will add even more price pressure. The automotive industry is already facing the problems of affordability,” Cox Automotive wrote in a recent commentary.
According to the Consumer Price Index, car insurance premiums have increased by 12% over the past year.
Insurance costs began to rise rapidly in 2022 and 2023 as Americans worked frequently from home and commute to work more frequently, Brannon said.
“More people hit the roads at the same time, which led to more accidents,” he said.
