The Impact of Tariffs on Auto Insurance Premiums: What You Need to Know

13 Jun 2025

When most individuals consider tariffs, they envision increased prices on items such as electronics, steel, or foreign food. What usually escapes notice is how tariffs—particularly those on cars and car parts—can cascade through the economy and ultimately impact your car insurance rates. Whether you’re a weekday commuter, a weekend road warrior, or simply someone who’s looking to keep household expenses under control, knowing the relationship between trade policy and auto insurance rates is more important than you realize.

Here’s how tariffs can affect what you pay for car insurance and how you can shield your wallet.

What Are Tariffs?

Tariffs are government-imposed taxes on imports or exports. In the case of the automotive sector, tariffs can be applied to:

• Imported automobiles
• Imported auto components (such as bumpers, sensors, engines, and glass)
• Raw materials to be used in car production (such as steel and aluminum)

Tariffs are generally designed to promote domestic industries or stimulate local production, but they can also drive up the price to consumers—and that includes consumers of insurance.

How Tariffs Influence Auto Insurance Rates?

So, how is there a connection between trade policy and insurance prices? It has to do with the economics of replacing cars.

1. Increased Vehicle Repair Costs

One of the most direct effects of tariffs on insurance premiums is the rising cost of vehicle repairs. Modern cars depend on a vast array of globally sourced parts. Repair shops spend more money on replacements if tariffs are put on imported auto parts. Typically, these parts are affected:

• Windshields and glass
• Sensors for advanced driver-assistance systems (ADAS)
• Engine components
• Lighting systems
• Body panels (doors, bumpers, hoods)

When repairs are more expensive, insurers must pay out more to cover claims. Those higher costs are routinely passed on to policyholders in the form of increased premiums.

2. Higher Vehicle Replacement Costs

If your vehicle is wrecked in an accident, your insurer pays you back based on its worth. Taxes on imported autos or major components used in the assembly process may raise the entire market value of both foreign-produced and domestically made vehicles. The higher replacement prices mean higher compensation by insurers, again resulting in higher premiums across the board.

3. Effect on Car Manufacturing and Supply Chains

Tariffs have the potential to break supply chains and lower the availability of some parts or vehicles. This can:

• Lengthen repair wait times.
• Result in the utilization of more costly alternatives.
• Raise the risk of claim delays or customer dissatisfaction.

Insurance companies then need to factor these added risks and uncertainties into rate-setting.

Real-World Examples

During the US-China trade dispute, steel and aluminum tariffs escalated prices for car manufacturers and part suppliers. Consequently, most repair shops indicated that the cost of parts, particularly those utilized in collision repairs, was higher. Some of the hikes were, transferred to insurance premium increases across the nation.

In the same way, threatened tariffs on European-made cars and auto parts had insurers and consumer groups sounding alarms about high premium hikes—up to $100 to $300 annually per vehicle in some instances.

Who’s Most Affected?

Although all motorists might see the effects of tariffs on their insurance premiums, some may be affected more than others:

• Owners of imported vehicles: Particularly luxury models or those with customized parts.
• High-traffic drivers: Where more accidents and repairs happen.
• Younger or higher-risk drivers: Those who already have to pay more in premiums and potentially face larger hikes.
• Commercial vehicle and fleet owners: Who deal with several cars and face heavy exposure to repair bills.

What Can You Do About It?

You cannot stop international trade policy, but you can take steps to limit the effect of tariffs on your car insurance premium.

1. Shop Around for Insurance

Don’t settle with the same insurer due to habit. Premiums differ significantly among insurers, and some are better able to absorb increasing costs without hiking rates significantly. Compare using comparison tools or via an independent agent.

2. Think About the Ownership Cost When Purchasing a Car

When buying a new or used vehicle, factor in not just the sticker price but also the cost of repairs and insurance. Cars with higher repair costs—often due to expensive or imported parts—may come with higher premiums.

3. Review Your Coverage Annually

You could be overpaying for more coverage than you require. For instance, if your car is old, it may be worth canceling comprehensive or collision coverage. Lowering your deductible is another method to save money on your premium.

4. Maintain a Clean Driving History

Though tariffs may increase base prices, your driving record remains a considerable factor in your price tag. Avoiding wrecks, tickets, and claims keeps your rates low, even when rates go up across the board.

5. Keep Good Credit

In most states, credit ratings are used to determine insurance premiums. A higher rating can counteract other increases in cost.

The Bigger Picture

Auto insurance carriers are information-driven companies. They change rates continuously as a function of risk characteristics, claim history, and economic indicators—such as the cost of repairs and components. If tariffs drive those up, insurers respond by raising premiums to remain profitable.

Even if insurance carriers attempt to amortize those increases among their clientele, the consequences are tangible and quantifiable—if tariffs continue or grow.

Tariffs and Your Wallet: The Surprising Impact on Car Insurance Costs

Although the relationship between tariffs and car insurance rates isn’t always intuitive, the financial ripple effect is real. As components become pricier and vehicle values appreciate thanks to tariffs, insurance providers have higher claims to pay—and they do so at your expense.

Being aware of these under-the-radar factors enables you to make more intelligent choices regarding your car, your insurance company, and your coverage limits. Remaining vigilant, comparison shopping, and knowing what influences your rates can enable you to stay in the driver’s seat, even as continuing global trade shifts reorder the marketplace.

Contact Warren Insurance Agency Inc at 617-265-1414, 617-297-7164 for more info.