Trump’s Tariffs Will Make Car Parts Costlier — Which Could Translate to Higher Auto Insurance

Much of America has been braced for the impact of President Trump’s promised tariffs since he retook office in January. Even the president himself, when asked directly, didn’t rule out a recession this year — which he sees as a short-term economic "period of transition" in response to his policies.

One of the biggest concerns has been his suite of auto tariffs, which went into effect on Thursday, April 3. A tariff of 25% will be assessed on all imported vehicles, and a tariff of the same amount will apply to imported auto parts (though this tariff has yet to go into effect, and is slated to do so by May 3).

Yet, uncertainty around implementing the tariffs remains. On April 9, the administration announced a pause on many of the reciprocal tariffs enacted the week prior. However, this change does not appear to impact the 25% tariffs on imported autos and auto parts, or on steel and aluminum.

While the future of the tariffs remains unknown, the auto industry is bracing for increases to the price of foreign-built vehicles, as well as domestic-built vehicles using parts manufactured in other countries. However, Americans may want to brace for yet another economic impact: an increase in car insurance prices across the board.

How Trump’s tariffs might affect auto insurance prices

The tariffs are set to impact car parts imported from Mexico and Canada — from which we import, by some estimates, just over 50% of our total auto parts supply. In some cases, we have no means to manufacture the same parts here in the U.S.

Coupled with the 25% tariff on all steel and aluminum (materials from which many car parts are made), repair and replacement costs for vehicles in general could skyrocket. Pricier auto parts could lead to pricier repair costs for insurers, with the American Property Casualty Insurance Association (APCIA) estimating an annual rise in claims cost of $30 to $60 billion.

Insurers may choose to offset those costs with even higher premiums for consumers. But just how much rates will increase remains to be seen — though some experts tell the Detroit Free Press that the factors that impact rates the most are the cost of stolen cars and personal injury payments, not repairs.

Still, rising car insurance rates are already a point of concern for consumers, thanks to a confluence of factors ranging from supply chain issues to inflation.

Yes, the cost of buying a car could increase, too

Obviously, along with car insurance rates, cars themselves are likely to increase in price — about 50% of the 16 million cars purchased in 2024 were imports, and only around half the parts of each domestically assembled car that year originated stateside.

According to Kelley Blue Book, the average new car purchase transaction reached $49,740 in December 2024 — though the outlet specifies that this figure is due specifically to "Americans choosing to buy more expensive models."

Still, according to the same site, even the average used car was listed for more than $25,000 last month, a total that may be out of reach for many individuals and families.

While consumers may think that the tariffs will only affect luxurious foreign cars, experts predict price increases for all vehicles. (After all, many include foreign-made parts, or parts made with foreign-sourced aluminum or steel.)

While some expect that automakers will have to eat some of these costs, increases could be high enough that it’s virtually impossible to keep them from translating into consumer prices — which could impact the entire market, including used cars.

How to keep your transport affordable in the face of Trump’s tariffs

Tariffs or no, Americans have to get around — and almost half of us have no access to public transportation. In other words, most of us will still rely on our cars, even if it costs us.

Fear of tariff fallout has caused some Americans to rush through car purchases in an attempt to get ahead of the effects. If that’s you, consider opting for a car that’s cheaper to insure, like a Honda CR-V or a Mazda CX-5. And even for those planning to buckle down and keep the cars they currently own until the wheels (perhaps literally) fall off, the tariffs could make certain types of repairs prohibitively expensive — especially larger repairs required by older vehicles.

(Still, if you can avoid buying a new car right now, there’s a good chance it’s a decision that’ll serve you well.)

As far as car insurance is concerned, even with rising prices, shopping around can really help — as can switching carriers every now and again. In fact, according to one ValuePenguin study, 92% of policyholders who switched saved money.

If you do decide to shop around for a new insurance policy, you’ll be in good company. Skyrocketing rates have caused a recent increase in the number of policyholders getting quotes and switching.

Time will tell how President Trump’s economic shake-ups will pan out in the long run — but for now, any cost-cutting measures you can take may be worth taking.