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Tariffs don’t apply directly to car insurance, but they can still raise your insurance costs. That’s because tariffs apply directly to items that affect the cost of car insurance claims, namely auto parts, steel, and aluminum.
Since the Trump administration’s tariffs were enacted, those costs have been passed down to auto dealers and consumers, and the average suggested retail price of a car has increased 10.4%.
Here’s how tariffs impact your insurance bill and ways to lower your costs.
Automotive tariffs have triggered a domino effect that could contribute to higher car insurance costs over time.
When tariffs increase the cost of vehicles and auto parts, it becomes more expensive to repair or replace a car after an accident, theft, or other covered loss. As repair and replacement costs rise, insurers often end up paying more for claims. Those higher claim costs can eventually be reflected in car insurance premiums.
“Auto insurance premiums are a reflection of the cost to pay claims,” Stephen J. Crewdson, senior director in the Global Insurance Intelligence Group at J.D. Power, a global data and analytics company, said via email. “As these claims costs go up or down, premiums will eventually follow.”
While many of the tariffs have been in place for more than a year, insurers, repair shops, and auto manufacturers are still working to assess their direct impact. Because tariffs are only one piece of the cost puzzle affecting repair and replacement expenses, it’s difficult to pinpoint exactly how much they may contribute to higher insurance rates.
In April 2026, the American Academy of Actuaries cautioned that tariffs on imported vehicles and auto parts could increase insurers’ claim costs, potentially pushing up car insurance rates. At the same time, rising labor costs, supply chain challenges, and increasingly advanced vehicle technology have also made vehicles more expensive to repair and replace.
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Several tariffs are affecting the auto industry, including tariffs on imported vehicles, auto parts, steel, and aluminum. Many of them stem from Section 232 of the Trade Expansion Act of 1962, which gives the U.S. government the authority to impose tariffs on certain imports for national security reasons.
While tariffs on imported vehicles tend to make the headlines, their impact extends beyond the dealership. Many of the parts and materials used to build and repair vehicles, including steel and aluminum, can also be subject to tariffs. Because modern vehicles rely on parts sourced from around the world, even cars assembled in the U.S. may be affected by higher import costs.
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Although you won’t necessarily see a separate “tariff fee” on your auto insurance bill, the impact of import tariffs can show up in some less obvious ways. According to Cox Automotive, tariffs cost the automotive industry an estimated $30 billion during the first full year they were in effect. The company estimates they also increased imported vehicle prices by an average of $5,000 to $8,900 and raised the cost of vehicles assembled in the U.S. by roughly $1,600 to $2,000.
As manufacturers, suppliers, and repair shops adapt to higher costs, some of those expenses can be passed on to consumers through higher vehicle prices, repair costs, and, potentially, auto insurance premiums.
Typically, as vehicle part costs increase, so does the cost of repairing a damaged vehicle. Because insurers usually pay for those repairs after a covered claim, higher repair costs can eventually lead to higher insurance rates.
But remember that while tariffs can contribute to higher car repair costs, they’re not the only reason repairs are becoming increasingly more expensive. Other factors, such as increased labor costs, supply chain challenges, and more high-tech features can all add to the final bill.
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Since many replacement parts used in U.S. auto repairs are imported, tariffs can have an industrywide ripple effect on repair costs. According to Jon Ward, vice president of public affairs with the American Property Casualty Insurance Association (APCIA), about 6 of every 10 auto replacement parts used in U.S. auto shop repairs are imported from Mexico, Canada, and China.
As repair costs increase, damaged vehicles may be declared a total loss more often. When that happens, insurers typically pay the vehicle’s actual cash value (ACV) rather than covering repair costs. In fact, CCC Intelligent Solutions reports that total loss frequency increased to 23.1% across all loss categories, the highest level in the industry to date. This reflects how rising repair costs are changing the economics of repairing versus replacing vehicles.
This, in turn, may leave more drivers shopping for replacement vehicles at a time when new and used vehicle prices may also be affected by tariffs.
Learn more: What happens when your car is totaled?
Tariffs can also impact repair timelines. As the cost of imported parts rises, some repair shops may face longer wait times for certain replacement parts. When repairs take longer, insurers may end up paying for rental vehicles for a longer period, which can increase the cost of rental reimbursement claims.
Rental reimbursement insurance is an optional coverage that helps pay for a rental car while your car is being repaired for a covered claim.
Consumers with rental reimbursement coverage could end up paying more out of pocket for a rental car if the repair delay exceeds the coverage limit, which is typically 30 days, said Colleen Parsons, an independent insurance agent with World Insurance Associates in the Rochester, New York, area. “This reminds me of what we went through during the pandemic when parts weren’t easily available, and there were a lot of delays.”
While some tariffs have been in place for more than a year, consumers typically won’t see changes in their insurance rates right away.
“There is a lag in changing premiums as insurers usually want months of data to analyze before adjusting rates,” Crewdson of J.D. Power said. “Some states require prior approval, which takes time, and auto policies are six-month policies, so some customers won’t see the premium changes for months after they happen.”
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Any increase in insurance rates will likely depend on a variety of factors, including the type of vehicle being repaired, the parts required, and the extent to which tariffs affect those repair costs.
Despite the intention of using tariffs to encourage more manufacturing in the U.S., shifting automotive production is a big undertaking that won’t happen overnight. Modern vehicles rely on thousands of parts sourced from around the world, and moving manufacturing operations or supply chains can take a significant amount of time.
“Moving an auto supply chain takes at least two years and billions of dollars, making quick shifts in production nearly impossible,” Liz Hempel, a partner at McKinsey & Co., a global management consulting firm, said via email. “With seven-year model cycles and specialized infrastructure concentrated in key regions, the automotive industry faces unique hurdles. Beyond factory relocations, moving decades of expertise is another major challenge.”
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You can’t control tariffs. But you can take steps to manage your car insurance rates and keep them as low as possible. Here are some tips.
It’s best to resist the temptation to cut necessary coverage to save money. For instance, before lowering your auto liability limits, consider how much coverage you need based on your assets and financial situation. Lower limits may reduce your premium, but they could also leave your assets at risk if you’re responsible for a costly accident.
While reducing coverage may save a little money on your insurance bill, it could prove costly if you’re sued and don’t have enough insurance to cover the costs. “It’s too big of a risk to gamble,” Parsons said.
Read more: How much car insurance do I need?
Your deductible is the amount you pay before your auto coverage kicks in, after filing a claim. Simply put, the higher the deductible, the lower your car insurance premium for collision and comprehensive coverage.
Choose a deductible you can comfortably afford to pay out of pocket if you have to file a claim. It’s also wise to consider keeping that amount in savings so it’s available if you ever need to access it.
Check with your insurance agent to make sure you’re getting all the discounts you qualify for. While many discounts are usually applied automatically, like vehicle safety discounts, your agent may be able to find others you can use. For example, there are often small discounts for going paperless or using EFT payments. Some insurers offer discounts for completing a defensive driving course.
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Review your coverage each year to ensure it still aligns with your needs. For example, if your vehicle has significantly decreased in value, you may want to review your collision coverage and deductible to see whether they still align with your needs and budget.
It’s also a good idea to compare several quotes from different insurers to make sure you’re getting the best coverage and rate available. You can usually gather quotes online or work with an independent insurance agent to compare the most favorable options for your situation.
Yes, but the impact will vary. Tariffs can increase the cost of imported vehicles and replacement parts, potentially driving up the prices of both new and used vehicles over time. As vehicle prices and repair costs rise, car insurance premiums could eventually increase as well.
However, because tariffs are just one factor that impacts auto repair costs, it’s still difficult to determine exactly how much of any insurance rate increase can be directly tied to tariffs.
Unfortunately, there’s really no simple answer as of now. Although the tariffs may more directly impact imported vehicles, nearly every modern vehicle sold in the U.S. requires imported parts that may be subject to tariffs. Even cars assembled in the U.S. rely on global supply chains, making it challenging to determine exactly which vehicles will experience the largest cost increases.
Source: Yahoo Finance
