S&P Global Mobility says there’s a 50% probability that the auto industry will experience an extended disruption period due to the tariffs. (Credit: vadimborkin/Adobe Stock)
President Trump’s tariffs on goods from Mexico and Canada will make vehicle repairs and new cars more expensive — putting pressure on insurers to raise auto premiums.
A full-coverage car insurance policy averaged $2,313 per year in 2024, according to Insurify, up 15% from the previous year. Even before tariffs, premiums were expected to increase another 5% in 2025.
The tariffs, which place a 25% duty on goods imported from Mexico and Canada, could lead to larger increases. More than 30% of auto parts used in the U.S. are imported from Mexico and Canada. For many car makers, the North American supply chain is highly integrated, so auto parts can cross the U.S. border several times.
Key materials also come from Mexico and Canada. According to the American Iron and Steel Institute, Mexico and Canada provided about 35% of U.S. steel imports last year, and Canada supplied almost half of U.S. aluminum imports.
After speaking with automakers last week, Trump suspended the tariffs for most cars and car parts until early April, but the suspension period is likely not enough time for most companies to make significant production adjustments should the tariffs go back into effect when it ends.
Additionally, on Wednesday, 25% tariffs on steel and aluminum from all countries went into effect. Trump is expected to announce more tariffs on other countries on April 2.
This week, S&P Global Mobility said there’s a 50% probability that the auto industry will experience an extended disruption period due to the tariffs. Under that scenario, several vehicle models could cease production, and new vehicle prices would rise.
“The recent trade measures introduced by the U.S. government will have significant repercussions across the automotive and insurance industries,” said Charlie Hutcherson, insurance analyst with GlobalData, in a statement. “The tariffs on imported auto parts from Mexico and Canada will drive up costs across the supply chain, making vehicle repairs more expensive and contributing to rising insurance premiums.”
According to GlobalData’s 2024 Emerging Trends Insurance Consumer Survey, U.S. drivers are already paying some of the highest car insurance premiums in the world. Among all 11 countries included in the survey, the U.S. had the highest proportion of consumers paying more than $1,000 annually for car insurance. About 53.5% of Americans pay more than $1,000 for car insurance, while just 21% of drivers in the U.K. and 16.9% of drivers in China do so.
Last week, the American Property Casualty Insurance Association (APCIA) voiced concerns about the tariffs, estimating that annual personal auto insurance claims costs could increase by anywhere from $7 billion to $24 billion under the policies.
“Tariffs can be effective tools of government if used with precision,” said David Sampson, APCIA president and CEO, in a statement. “However, these new tariffs are so broad that they are likely to hurt the families, individuals and business owners they are meant to protect. All of these increased costs would adversely affect home, auto and business insurance affordability nationally, at a time when the marketplace is already plagued by legal system abuse and regulatory uncertainty.”
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