Trump’s Tariffs Expected to Raise Car Insurance Premiums 8% by End of 2025
U.S. President Donald Trump’s tariffs could cause a significant increase in auto insurance rates.
According to a new analysis from Insurify, full coverage car insurance rates are expected to rise to $2,502, on average, by the end of 2025.
Insurify linked the increase to Trump’s 25% tariff on imports from Canada and Mexico, which are expected to take effect in March.
Trump’s tariffs are expected to significantly increase the cost of vehicle repairs and replacements, and insurers would pass those higher costs onto policyholders.
According to the same Insurify report, full coverage car insurance premiums would rise 5% by the end of 2025, to an average of $2,435 per year, without Trump’s tariffs.
Why Tariffs Raise Insurance Premiums
Trump isn’t setting tariffs on car insurance. So why do tariffs make car insurance more expensive?
Trump’s tariffs are expected to significantly raise the cost of covering insurance claims.
The United States imports a significant number of auto parts and vehicles from Canada and Mexico. When tariffs go into effect in March 2025, they’ll immediately cause a 25% increase on the cost of these auto parts and vehicles.
When insurers pay a claim, they cover the cost of repairing a vehicle (say, with imported auto parts) or replacing a vehicle (say, with an imported vehicle). If you’re repairing or replacing a vehicle with parts imported from outside the United States, then your repair bill could be 25% more expensive.
Insurers pass these costs onto policyholders, leading to higher premiums.
How Trump’s Auto Industry Tariffs Work
President Donald Trump has proposed significant tariffs on two of America’s largest trading partners, Canada and Mexico.
Those tariffs include:
- 25% tariffs on all imports from Canada
- 25% tariffs on all imports from Mexico
- 10% tariffs on all imports from China
- 25% tariffs on all imported aluminum and steel
- 25% tariff on imported automobiles, pharmaceuticals, and semiconductors
According to the American Property Casualty Insurance Association, approximately 6 of every 10 auto replacement parts in the United States are imported from Canada, Mexico, or China.
Complicating things further, some parts cross the border multiple times before becoming a finished product. It’s possible that the cost of these components could rise higher than 25%.
Meanwhile, as Cox Automotive explains, domestic suppliers can’t simply catch up. Here’s how Erin Keating, Executive Analyst at Cox Automotive, explains the inability for US producers to simply fill the production gap:
The delays and uncertainty are doing no one any favors, and there is little automakers can do in the near term, as changing sourcing and/or production sites is not an easy task and costly as well…
According to Cox Automotive, Class 8 trucks are at a particularly high risk of higher insurance premiums, as around 40% of Class 8 trucks sold in the United States come from Mexico.
Cox Automotive also expects major OEMs like Volvo, Paccar, Dailmer, and International to experience significantly higher prices because of the tariffs.
Car Insurance Premiums Already Rose 12% Last Year
As costs rise, insurance passes higher costs onto policyholders.
According to the consumer price index, auto insurance rates rose 12% in the last year. If Insurify’s analysis is correct, rates could rise another 8% this year.
Home and auto insurance premiums are soaring, and Trump’s tariffs are expected to add more upward pressure. If Trump’s proposed tariffs take effect, vehicle owners across the United States could be paying $2,502 per year, on average, for full coverage car insurance, according to the latest Insurify report.
