Is it Really True That Tariffs Will Raise Car Insurance Rates?

Tariffs will make buying a car more expensive. It’s also been widely projected that come renewal, your car insurance premiums will increase due to tariffs. ^[4] Much has been written about tariffs raising car insurance rates ever since President Trump announced his plan, at rates which have fluctuated over several weeks, mainly due to negotiations. The tariffs Trump had in place at the time of reporting were at 10% to 145% on imported goods. In addition, there is a 25% tariff on steel and aluminum, both of which are vital components of car parts. ^[1] The only countries exempt from tariffs on car parts are Canada and Mexico. Other countries manufacture car parts that are subject to tariffs. Let’s focus on whether the claim that tariffs raise auto insurance rates is accurate.;

On This Page

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  What Is a Tariff and Why Does it Affect Car Insurance?

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  What Do Car Parts Cost Have to Do With Car Insurance?

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  What Is the Tariff Rate on Car Parts?

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  Have Insurers Raised Rates Due to Tariffs in the Past Month?

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  Will Tariffs Raise Car Insurance Prices FAQs

What Is a Tariff and Why Does it Affect Car Insurance?

A tariff is a tax placed on imported goods. Cars made of components, if not manufactured entirely in other countries, are now subject to tariffs. The tariffs the Trump administration has set in place will make cars and car parts more expensive, especially foreign parts that are not made in Canada or Mexico, which means costlier claims in the event of an accident or theft of a car. Steel and aluminum are also subject to tariffs now, and many car parts are made of these resources. ^[1] Car insurance pays claims according to the value of a car and car parts.

What Do Car Parts Cost Have to Do With Car Insurance?

Insurance pays for repairs and total losses of cars, so in essence car insurance companies are paying for car parts or the total value of the car. On May 3, 2025, 25% tariffs on foreign-made auto went into effect, with Canadian and Mexican car parts getting an exemption on said tariffs. ^[2]

As for the other countries that export parts to the U.S., the administration has taken steps to avoid parts tariffs from stacking on top of other tariffs. For instance, they won’t have to pay 25% for parts on top of 25% on the value of steel components. Only the higher or highest tariff applies. Still, car makers and car owners will feel the pinch. ^[2]

Not too long ago, car insurance rates went up due to supply chain disruptions caused by COVID. There weren’t enough car parts readily available and this affected both car makers and the owners of used cars. Car insurance premiums went up as a consequence.

Car parts are necessary to make new cars and to fix not-so-new ones. When there are high tariffs on imports of car parts, the price goes up, just as it did when supply was short of demand due to the pandemic.

Will the tariffs affect you and the car you own or buy? Not necessarily, if the car and car parts are made in the U.S. Mexico or Canada.

What Is the Tariff Rate on Car Parts?

Tariff rates vary by country. For instance, there is a 125% tariff on China and possibly none on Mexico and Canada. There will be a 25% tariff on European car parts.

Have Insurers Raised Rates Due to Tariffs in the Past Month?

You will know if your insurance rate will increase come renewal. Insurers know if you have a car that is tariff proof or will need more expensive parts because the part comes from a country with a 25% or 125% tariff. When rates rise according to economic shifts, such as Trump’s new tariffs, insurers will need to look at each profile more closely.

However, the added administrative task requires extra work, which means money spent across the board for insurance companies. So, will insurers raise rates all around? Probably. Will rate increases be more expensive for some than others? Yes, probably.