Car Insurance Could Skyrocket : It is a world of hurt for car insurance rates if President Trump imposes tariffs on Canada and Mexico.Full-coverage car-insurance costs would jump 60 percent faster in 2025 under the assumption of a 25 percent tariff on the countries, according to research from the insurance-comparison website Insurify.
That would lift average full-coverage cost to $2,502 a year after tariffs by end-2025 from $2,435, an 8% increase vs 5%.Tariffs on Canada and Mexico would also raise car insurance rates, Insurify said, because the U.S. imports steel and aluminum to manufacture car parts.
“As the cost of replacement parts gets higher, premiums will have to follow suit,” Daniel Lucas, carrier relations manager at Insurify, said in the report.About 35% of U.S. steel imports in 2024 came from Canada and Mexico, and Canada provided about half of aluminum imports, Insurify said.
The U.S. also sources about 32% of its auto parts from Canada and Mexico.Proponents of tariffs argue they will drive automakers and repair shops to purchase more U.S.-made parts, solidifying domestic manufacturing.However, Insurify said that transitioning to more U.S. manufacturing would not happen immediately and car insurance rates would continue to rise in the interim.
And components like wire harnesses, seat trims and armrests are wholly produced overseas because they are too expensive to manufacture in the United States, Insurify said, citing Wolfe Research, a New York-based financial research firm.“All these factors can increase the price of a claim — pricier parts, diminished [domestic] supply and longer supply chains, which increase rental expenses, as cars take longer to repair,” Lucas said.
What state-by-state impact would tariffs have on car insurance rates?New York state would be particularly hard hit.In New York, it said the annual cost would be $4,293 for full-coverage auto insurance, with $110 of that increase coming from tariffs.In the absence of tariffs, car insurance rates would be flat or decreased in five states, according to Insurify: Vermont, New Hampshire, Hawaii, New Mexico and Idaho.But with tariffs, rates would rise in every state, Insurify said