Consumers have been racing to snatch up cars in recent weeks before President Donald Trump’s auto tariffs trigger widely expected price hikes. But even drivers who aren’t buying vehicles can expect to pay more for repairs and insurance.
That’s because Trump’s 25% tariffs on imported vehicles are set to be extended to foreign-made auto parts no later than May 3. While Trump indicated this week that he may offer some leniency or perhaps “a little bit of time” for the industry to adjust, experts say the steeper trade barriers remain on track to hit consumers’ wallets eventually.
The cost of auto insurance has been rising for several years, and experts say prices were already likely to increase in 2025. An extended trade war could cause the average annual cost of car insurance to rise more than $300 by the end of the year, according to estimates from the insurance agency Insurify.
The reason is straightforward: It will cost insurance companies more to replace damaged car parts that are subject to tariffs.
“When you get into an accident, your car insurance company is the one that’s going to be buying those parts to repair your vehicle,” said Terence Lau, dean of syracuse University’s College of Law, who was previously a trade lawyer for Ford Motor Co. “Many products are imported, and so I expect that will see some upward pressure on car insurance premiums.”
Tires are one example. Nearly 80% of the world’s natural rubber exports come from five countries: Thailand, Indonesia, Ivory Coast, Vietnam and Malaysia. That means U.s.-based tire plants will have to pay more for the raw materials they depend on overseas suppliers to provide.
Many vehicles are vulnerable to multiple Trump administration tariff policies — from those on the auto industry itself to separate levies on steel and aluminum, looming taxes on chips and sweeping duties on global imports, some of which the White House has temporarily ratcheted back.
The auto industry’s extensive international supply chains mean there’s no vehicle built entirely domestically with American-made parts. Almost 7 in 10 new cars are assembled abroad, according to an NBC News analysis of National Highway Traffic safety Administration data. And as many as 6 in 10 replacement parts are imported, data from the American Property Casualty Insurance Association shows.
Vehicles have been flying off dealers’ lots as consumers try to get ahead of tariff-related price hikes. Retail sales figures the Commerce Department released Wednesday showed sales at motor vehicle and parts dealers jumped 5.3% from February to March.
The sturdy demand has driven down the daily supply of new vehicles, a common inventory metric that plunged from 91 days at the beginning of March to 70 days in April, according to Cox Automotive. Used vehicle inventories declined from 43 to 39 days, the group found.
As people hang on to their wheels for longer, industry experts foresee higher demand for used vehicles, which could drive up prices in that market, too.
“If you’re doing the fiscally responsible thing and driving a vehicle that’s maybe 10 or 15 years old until the wheels fall off, the cost of general upkeep will increase,” said Ivan Drury, director of insights at Edmunds.
Drivers whose insurance policies are set to be renewed later in the year are likely to see some of the first price hikes, experts say. The expected hikes could vary by state, with New York and Florida set to experience the steepest ones, Insurify estimates.
The forecast is a reversal from what experts had anticipated before Trump kicked off his trade war. Insurance rates spiked in the years following the Covid pandemic, because of rising costs from inflation and a surge in reckless driving. But trends were just starting to normalize around the start of the year.
“We’d finally gotten to the point where rates had caught up to the losses, and we actually started to see some companies decrease their rates a little bit,” said Bob Passmore, a vice president at the American Property Casualty Insurance Association.
some automakers have already halted shipments to the United states over tariff-related uncertainty. British luxury car company Jaguar Land Rover announced a pause in early April. Other overseas auto brands, such as Audi and Mitsubishi, have taken similar steps. Among domestic car companies, General Motors has been ramping up U.s. production while stellantis idles some plants in Canada and Mexico.
For consumers, Lau advised: “Don’t panic. Because when you panic, you make bad decisions.”
